- The spread between the US 10-year treasury yield and 2-year treasury yield (10s2s) fell to 24 basis points today - the lowest level since August 2007.
- The relentless flattening of the curve could be an indication the Fed is nearing neutral rate.
The US Treasury yield curve, as represented by 10s2s spread, hit fresh 11-year low (flattest) since August 2007.
The flattening yield curve is likely suggesting that the Fed's interest rate is close to its neutral rate than its forecasts indicate.
Note that the Fed’s own range of estimates for the neutral rate was 2.3 percent to 3.5 percent in June. Further, the central bank intends to hike rates two more times this year.
So, the Fed could soon hit the neutral rate range and the market focus could shift from "faster rate hike narrative" to whether the central bank is feeling the need to contract the economy, i.e. push interest rates above the neutral rate.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.