As U.S. Rate Expectations Rise, Treasury Yield Spread Widens Significantly

As U.S. Rate Expectations Rise, Treasury Yield Spread Widens Significantly

Investors have raised their expectations for future U.S. interest rates substantially and no longer expect meaningfully lower rates further down the line, said J.P.Morgan analysts in a note.

"What had been expectations for a 3% Fed Funds rate by year-end 2025 is now a 4% Fed Funds rate," they said.

With the U.S. economy improving, there has been a particularly notable increase in longer-dated Treasury yields alongside rising rate expectations. This has increased the spread between 2-year and 10-year Treasury yields to its widest level since 2022, the analysts said.