US treasury yield curve flattest since December 2018


  • US treasury yield curve or the spread between the 10- and two-year yield has dropped to eight-month lows.
  • The yield curve may invert on escalating US-China trade tensions and dovish Fed expectations.

The US treasury yield curve, as represented by the spread between the 10-year and two-year bond yields, is currently the flattest since December 2018.

As of writing, the spread is seen at 0.097 basis points – down more than 17 basis points from the high of 27.5 basis points seen on July 18.

Notably, the benchmark 10-year yield, which stood at 2% on July 31, fell to 1.59% on Wednesday and is now trading at 1.70%, meaning the yield is down 30 basis points on a month-to-date basis.

Investors have rushed for the safety of government bonds amid escalating US-China trade tensions.

President Trump said on Aug. 1 that the US will impose an additional 10% tariff on $300 billion worth of Chinese goods from next month, abruptly ending the month-long trade truce.

In response, China has allowed the Yuan to depreciate beyond 7 per US Dollar.

That, in turn, has bolstered expectations of aggressive easing by the US Federal Reserve (Fed) before the year-end.

Curve inversion ahead?

An inverted yield occurs when the long duration bond yield drops below the short duration bond yield.

An inverted curve between the 10 and two-year yields is widely considered a recession indicator.

With escalating trade tensions and increasing dovish Fed expectations, the investors are worried that the curve would invert.

It is worth noting that the spread between the 10-year and three-month yield has already turned negative. It is currently seen at -31 basis points, having hit a low of -0.40 basis points earlier this week.

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.

Feed news

Latest Forex News

Editors’ Picks

EUR/USD falls to three-week lows amid fresh USD strength

EUR/USD has resumed its falls and hit a new low under 1.11, the lowest since late December. The greenback continues enjoying last week's upbeat American figures. US markets are closed on Monday.

EUR/USD News

GBP/USD is struggling as Britain veers away from the EU on trade

GBP/USD is trading around 1.30, on the back foot. The UK may break EU rules after Brexit, complicating the economic picture for UK industry. Last week's UK data continues weighing on sterling.

GBP/USD News

Cryptos in search of fresh funds after tripping lower

XRP tests the bullish scenario and clings strongly to the upside. ETH/BTC consolidates in the bullish zone and prepares its ascent to the skies. Bitcoin and Ether move away from the combat zone in search of new upward forces.

Read more

WTI trims initial gains, back near $59.00

Prices of the barrel of the West Texas Intermediate (WTI) are trading on a firmer tone at the beginning of the week, managing to clinch tops in the vicinity of the key $60.00 mark.

Oil News

USD/JPY bounces from session lows confirming breakout on charts

USD/JPY is currently trading near 119.20, having found bids at 110.08 in early Asia. The bounce has confirmed a flag breakout on the 5-minute chart and opened the doors for 110.34. The bullish view would be invalidated if the spot finds acceptance below 110.15. 

USD/JPY News

Forex MAJORS

Cryptocurrencies

Signatures