U.S. Treasury Yield Curve Steepening Highlights Monetary Policy Limitations

According to BlockBeats, Saunders, head of the fixed income department at Madison Investments, noted in a report that the ongoing steepening of the U.S. Treasury yield curve underscores a crucial point: the limitations of monetary policy's impact on the market. Saunders explained that policy changes can significantly affect the front end of the yield curve, but longer-term structural issues, such as inflation exceeding targets and large fiscal deficits, will continue to exert pressure on the back end. He mentioned that Federal Reserve Chair Powell's acknowledgment of a weakening labor market quickly led to bond purchases, reversing the initial sell-off of U.S. Treasuries and steepening the yield curve. Madison Investments anticipates that the Federal Reserve's pace of easing will slow down from now on, with expectations that the Fed will maintain interest rates unchanged until the second quarter of 2026.