July 31, 2019 / 6:37 PM / 3 months ago

TREASURIES-U.S. yield curve flattens on jitters about Fed 'policy error'

NEW YORK, July 31 (Reuters) - The gap between U.S. short- and long-dated Treasury yields narrowed on Wednesday, signaling some concerns the U.S. Federal Reserve may risk making a mistake if it did not lower interest rates further to combat overseas risks to the U.S. economy.

“This confirms strong domestic growth and a tight labor market mean very little in determining how many times the Fed cuts from here,” Ian Lyngen, head of U.S. interest rates strategy at BMO Capital Markets, wrote in a note about the Fed’s latest policy statement.

“Note the flattening of the curve implies investors are worried about a potential ‘policy error’ if the Fed doesn’t act further,” Lyngen said. (Reporting by Richard Leong; Editing by Steve Orlofsky)

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