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The Best Illustration of Fed's Inflation Relations With Markets

  • Yield curve flattened after hot inflation data in the morning
  • Curve steepens after Fed cools to signs of faster inflation

If you want one chart that sums up what happened Wednesday -- from the hotter-than-expected inflation data released in the morning to the surprisingly cautious tone Federal Reserve Chair Janet Yellen struck in the afternoon -- look no further than the U.S. yield curve.

The spread between 10-year U.S. Treasury yields and five-year yields fell close to the narrowest level since 2008 after consumer price index data released in the morning by the Labor Department in Washington showed faster inflation than most forecasters expected.