Treasury Yield-Curve Mavens Are Pining for Guidance From Fed
- Flattening trend powered by expected rate hikes has stalled
- Balance-sheet machinations and inflation are wild cards
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Bond traders who’ve built careers on anticipating how Federal Reserve policy shifts will play out for short- and long-dated Treasury yields are stumped, with scant hope that next week’s policy meeting will clear things up.
As expectations mounted for at least four Fed rate increases this year, short-dated yields rose the most, flattening the curve, a typical pattern during monetary-policy normalization periods. The trend stalled when the central bank broke with tradition, saying its balance sheet might start shrinking shortly after the first rate hike. That’s viewed as likely to steepen the curve.