Analysis: U.S. Treasury Yield Curve May Invert

Odaily reported that the spread between 10-year and 2-year U.S. Treasury yields will narrow further in the coming months, and Capital Economics stated that escalating tensions in the Strait of Hormuz could lead to a complete inversion of the yield curve. "One reason for this divergence is that short-term real interest rate expectations have risen more than long-term real interest rate expectations, which may be a reaction to strong economic data." Capital Economics also expects the 2-year and 10-year Treasury yield curve to flatten further as investors price in expectations of additional rate hikes. "We forecast the Fed will raise interest rates by 75 basis points over the next year, while the market currently reflects expectations of 40 basis points," they said. (Jin Shi)