For the last several years, the 2-year Treasury yield has been trending higher. It’s been a slow crawl higher from a low base for this maturity, which is said to be the most sensitive for rate expectations, but the upward sloping directional bias has been clear. The same can be said for the benchmark 10-year yield, but the trend has been moving in the opposite direction—down. But this long-running divergence appears to be fading as the 2-year yield succumbs to gravity. If the shift continues, the implied message amounts to a sturdier forecast of lower economic growth and inflation.
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