All Posts Tagged: quantitative easing
U.S. Outlook: The mystery of the steepening yield curve
Chief Economist
The sharp steepening of the U.S.Treasury yield curve since the beginning of September deserves some sleuthing.
This 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.
