Treasury yield curve inversion has scope to deepen – BofA
The US Treasury yield curve is likely to deepen further amid the aggressive Fed tightening policy, Meghan Swiber, Director of US rates strategy at Bank of America (BofA), noted.
Key quotes (via Bloomberg)
While US inversions beyond 50 basis points have been rare in recent decades, “there is no natural limit on how inverted the 2s10s curve can go.”
The prospect of a hard landing for the US economy, “will likely skew curves flatter as hikes near term will probably be viewed as needed cuts in the future.”
If growth remains strong, “the curve may continue to flatten but to a lesser extent with longer-dated tenors also supported.”
Should “hold curve flattening positions until inflation and employment data moderate, given possible further upward re-pricing of the terminal rate.”
Author
Dhwani Mehta
FXStreet
Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.
