The U.S. Treasury yield curve has flattened over recent weeks despite an offsetting fall in inflation expectations, and could even invert, Capital Economics' James Reilly says in a note. "We wouldn't be surprised if this curve inverted, but we don't think a U.S. recession is likely," the senior markets economist says. The flattening over the past month or so has been driven by rising two-year yields as the 10-year yield has edged down. Falling term premia has helped bear down on long-dated real yields, strong economic activity has pushed up short-dated real yields, and the collapse in oil prices has put downward pressure on short-term inflation expectations, he says. "Our sense is that this curve flattening has room to run." (emese.bartha@wsj.com)
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U.S. Treasury Yield Curve Could Invert Again — Market Talk
The U.S. Treasury yield curve has flattened over recent weeks despite an offsetting fall in inflation expectations, and could even invert, Capital Economics' James Reilly says in a note. "We wouldn't be surprised if this curve inverted, but we don't think a U.S. recession is likely," the senior mar…