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One Section of the U.S. Yield Curve May Invert as Soon as Today

  • Gap between 3- and 5-year yields is skinniest in a decade
  • Inversion is likely as end of Fed rate hikes nears, BMO Says
Views Of The Federal Reserve Ahead Of Federal Open Market Committee Announcement

Photographer: Andrew Harrer/Bloomberg

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As bond traders scale back Federal Reserve rate-hike expectations, one section of the U.S. yield curve is on a fast track to inversion.

The spread between 3-year and 5-year Treasury yields shrank to less than 0.1 basis point on Friday, the smallest gap in more than a decade. It may turn negative by the end of the day, BMO Capital Markets says, as investors anticipate the end of the central bank’s tightening path.