Fed On Deck
Now it is up to the Fed to support the pro-growth moves. In the U.S., bond markets have signaled more growth via a steeper yield curve since the mid-February lows [Figure 2]. Improving economic data have been the biggest driver of the move, along with a reduction in investor pessimism. The 10-year Treasury yield has increased by 0.3% since then but remains lower by a still notable 0.3% year to date, suggesting investor psychology remains fragile amid global risks. The yield differential between the 2- and 10-year Treasury, another measure of yield curve slope, has increased in recent weeks; however, it remains not far off the narrowest (or flattest) levels of the past few years. There is still room for the Fed to have a positive impact.