Inverted Curve Alarm: Bond Yields at 15-Year Highs

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Treasury yields remain soaring after high U.S. inflation projected the Federal Reserve will need to make a third big 75bps adjustment at its meeting next week . Even the 100 bp is also now on the table.

Concerns about the effect of liquidity restrictions in the economy and in the stock market, also lower the demand for bonds, boosting yields, which move in the opposite direction to price.

The two-year note rose 5 bps to 3.83% , a high not reached 15 years ago in 2007. While the 1-year Treasury yield briefly crossed 4% today on Thursday and is trading near 3.99%.

And the 10-year Treasury bond yield rose 2 bps to 3.43% . This change in the curve usually anticipates economic contraction. And it is that shorter-term bonds, which are less at risk of their value being eroded by inflation, should have lower yields.

Although for it to really indicate that an imminent contraction is coming, this investment must remain that way, the inverted curve has already been going on for a few weeks, which sets off alarms and adds to the nervousness in the market.

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