U.S. Treasury Yield Curve Expected to Steepen Amid Economic Factors

According to Odaily, Citigroup's interest rate strategists have indicated in a report that the U.S. Treasury yield curve is likely to steepen, driven by short-term debt. In a 'bull steepening' scenario, short-term rates decrease more rapidly than long-term rates. The strategists noted that the risk of rising unemployment is increasing due to higher unemployment numbers or a sustained rebound in labor force participation. They expressed a tendency towards a steepening bull market by 2026. Consequently, Citigroup strategists believe that the market should have already factored in expectations of further Federal Reserve rate cuts in the latter half of this year, which would stabilize the 'belly' or the middle part of the curve. In a robust economic environment, coupled with a dovish Federal Reserve and growing concerns over supply, the yield curve is expected to steepen further.