US T-yield curve flattening continues, spread hits fresh decade low
|- The yield curve continues to flatten on weak inflation expectations.
The treasury yield curve flattening continues with the spread or the difference between the US 10-year yield and the 2-year yield falling to 65.5 basis points; the lowest level since Oct. 31, 2007.
It is widely believed that increased expectations that the Fed will continue to tighten interest rates is yielding a flatter yield curve (2-year yield spikes on rate hike bets). Also contributing to curve flattening are the weak price pressures.
Long-term inflation expectations, as represented by the 5-year, 5-year forward inflation expectations, and the US 10-year breakeven inflation rate, are showing no signs of life, The data released earlier this week showed the consumer prices barely rose in October. Consequently, the 10-year yield has had a tough time holding above the 2.4 percent mark.
Curve flattening is usually seen as bearish for the US dollar and vice versa.
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