Aggressive Change in Market’s Fed Outlook Drives Inversions in Yield Curve
- Spread between 3-month and 5-year yields turns negative
- Inversion between these maturities is first since 2008
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The bond market’s aggressive overhaul of its outlook for Federal Reserve policy is creating kinks in the front end of the Treasury yield curve.
Yields on the two- and five-year sectors fell relative to shorter-dated maturities Thursday, causing portions of the curve to invert. The spread between 3-month bills and 5-year notes turned negative for the first time since 2008, dropping as low as -5.7 basis points. The 1- to 2-year section also inverted, reaching -15 basis points at its trough.