Analysis: US Treasury Yield Curve May Invert

Odaily Planet Daily News The spread between the 10-year and 2-year US Treasury yields will narrow further in the coming months, according to Capital Economics. The firm stated that continued 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, compared with the 40 basis points currently priced in by the market," they said. (Jin Shi)