Analysis: The US Treasury yield curve may become inverted

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ME News on July 21 (UTC+8): Capital Economics said that over the next few months the spread between U.S. 10-year and 2-year Treasury yields will narrow further. It added that the ongoing escalation of tensions in the Strait of Hormuz could lead to the yield curve being completely inverted.

“One reason for this difference is that the expected rise in short-term real interest rates exceeds that of long-term real interest rates, which may be a response to strong economic data.”

Capital Economics also expects that as investors reflect expectations of additional rate hikes, the yield curve between 2-year and 10-year Treasuries will become even flatter.

“We forecast that the Fed will raise rates by 75 basis points over the next year, while current market expectations are for 40 basis points,” they said. (Jin10) (Source: ODaily)

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