US Treasury yield curve has steepened to record levels reflecting sentiments of the recovery of economic growth in the country. Economists are of the opinion that economic growth has returned and inflationary pressures are now a concern.
Funding of the purchase of US Treasuries will be a problem. With the US government trying to lower its current account deficit, other nations will not have enough US dollars on hand to purchase US Treasuries. The Americans will have to fund these Treasury sales internally.
According to the break even rate reflected by TIPS, the expected inflation rate is at 2.32%, up 9 basis points from last year.
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