Home » Inverting Yield Curve Signals High Stakes for Fed and Investors
(Bloomberg) — Any hope that the Treasury market’s biggest quarterly loss had priced in a worst-case scenario for inflation and Federal Reserve rate hikes is looking increasingly illusory.
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No sooner had the first quarter ended with a 5.6% loss for U.S. government bonds, the March employment data included a bigger-than-expected drop in the unemployment rate to 3.6%, among the lowest ever recorded, and set April off to a punishing start. The yield on the policy-sensitive two-year note climbed more than 13 basis points to 2.47%, topping the 30-year rate for the first time since 2007 and pulling further away from the 10-year yield, which it had exceeded earlier in the week.
The selloff was concentrated in short-dated Treasuries, and it reflects anxiety that the course of monetary policy is going to be even more drastic than has been contemplated. The Fed hasn’t raised rates by more than a quarter percentage point since 2000. Policy makers have all but…
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