U.S. Interest Rate Yield Curve Inverts, page 1

For the first time in five years, the interest rates on long-term U.S. Treasury bonds slipped below the rates earned by short-term bonds. Short-term rates are heavily influenced by the Federal Funds and Discount Rates, set by the Board of Governors of the Federal Reserve System, whereas long-term yields are more freely determined by the market. An inverted yield curve has often heralded recession or a slower growing economy.

Reuters

CHICAGO, Dec 27 (Reuters) - U.S. Treasury debt prices rose for a third straight session and 10-year yields were pushed below two-year yields for the first time in five years possibly signaling U.S. economic growth could slow in 2006.

Recent benign readings on inflation and signs of fraying in the housing market have dragged down longer-maturity yields recently, while expectations for at least one more Federal Reserve rate hike have held short-term rates steady.

The benchmark 10-year Treasury note jumped 10/32 in price for a yield of 4.343 percent, a two-month low, down from 4.378 percent on Friday.

Meanwhile, two-year note yields were at 4.351 percent, down from 4.364 percent, leaving the yield spread at an inverse of almost one basis point.

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I'm not really sure what it's going on in the Fed with all these recent rate hikes, the market is clearly showing more fear of recession than inflation. At least it looks like there'll likely be only one or two more.

[edit on 12/27/2005 by djohnsto77]