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The yield curve flattens, 2- and 10-year bonds converge

The spread between the two- and 10-year government bond yields continued its trend toward convergence this week. The trend was accelerated Wednesday by a combination of weak inflation numbers and the market's confidence that the Fed will raise rates at its September meeting.

As of Wednesday’s close, the difference between the two yields was slightly less than 80 basis points, surpassing previous lows in early September. Flattened yield curves can indicate a feeble market outlook, while inverted yield curves have preceded recessions.