Weekly Market Recap

26 July 2021

What explains the recent drop in US Treasury yields?
A crucial factor behind the yield curve flattening has been a shift in the Fed's rate hike expectations, driven by high inflation prints, the upward shift in the June FOMC dot plots, and hawkish language from some FOMC member. A change in market expectations will be necessary to observe a new term structure steepening, which could be in the cards as soon as this week: 28 July FOMC Meeting.

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