Conventional wisdom would have it that a flat yield curve is typically an indication that investors and traders are worried about the macroeconomic outlook.
From several vantage points, the U.S. economy seems to be doing fine. Growth, for the most part, has been trending upwards, the job market continues to shine and inflation is becoming less of a worry for the Federal Reserve.
However, the flattening yield curve is suggesting that everything may not be as rosy as it seems. The past week in the Treasury market saw a continuation of the longstanding yield curve flattening theme as longer-dated maturities saw firm demand, while the 2-year note recorded another weekly loss with 2-year note futures posting their eighth weekly decline in the past 10 weeks. The 10-2 year spread, which is the difference between the 2-year Treasury Note and the 10-year Treasury Note, compressed by 10 basis points (bps) to 60 bps.
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