Rate Reduction

The yield spread between the 5-year Treasury and the 30-year has recently narrowed despite rising inflation fears. The 5-year rate is up along with inflation, the 30-yr rate has barely budged. This is because markets now expect the Fed to raise rates sooner than later. That will weaken inflation and slow growth, both of which lower rates, especially long rates. To wit, historically rates generally decline when the Fed tapers.

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