Svmuu News: The yield spread between 10-year and 2-year U.S. Treasury bonds is expected to narrow further in the coming months, according to Capital Economics, which noted that escalating tensions in the Strait of Hormuz could lead to a full-blown yield curve inversion. “One reason for this divergence is that short-term real interest rate expectations have risen more than long-term real interest rate expectations, which may be a reaction to strong economic data,” Capital Economics noted. The firm also expects the 2-year and 10-year Treasury yield curve to flatten further as investors price in expectations for additional rate hikes. “We forecast that the Federal Reserve will raise rates by 75 basis points over the next year, while the market currently prices in an expectation of 40 basis points,” they said. (Jin Shi)