All Posts Tagged: quantitative easing

U.S. Outlook: The mystery of the steepening yield curve

Scott Anderson
Chief Economist

The sharp steepening of the U.S.Treasury yield curve since the beginning of September deserves some sleuthing.

Graph showing recent steep rise in yield curveThis breaks a strong and persistent downtrend in the spread (i.e., a flattening of the yield curve) that has been underway since July of 2015.

For more on what this could mean, see highlights of my report below, followed by a link to the full U.S. Outlook, delivered on Sept. 16.

Key observations:
  • Yield curve steepening historically has been driven primarily by signs, or expectations, of stronger growth or higher inflation.
  • As of Thursday’s close, the Fed funds futures market was placing just an 18% probability of a September rate hike from the Fed.
  • Bond investors in Japan and Europe have poured money into U.S. Treasury bonds to attain somewhat higher returns. Those foreign capital flows are likely slowing down now.
  • Bond investors are wondering if central banks have run out of ideas and options.
Click here to read my full report. Read More ›