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via Carl Surran
- The tightening yield spread is raising concerns among investors and Fed officials, as the phenomenon may indicate skepticism about the longer-term outlook for U.S. economic growth and inflation.
- The yield curve from five to 30 years continued to flatten Wednesday to as little as 29 basis points, the narrowest spread since 2007, and the gap between the two-year yield and the 10-year yield touched 41 basis points, also the smallest since before the financial crisis.
- The persistent flattening of the yield curve could pose a dilemma for the Federal Reserve, which seeks to gradually tighten policy.
- A truly inverted curve “is a powerful signal of recessions” that historically has occurred “when the Fed is in a tightening cycle, and markets lose confidence in the economic outlook,” John Williams, the next president of the New York Fed, said this week, although he said that is not the case now.