• Stock and bond investors appear to have very different views of future market and economic landscapes. For example, the U.S. stock market’s year-to-date returns of nearly 20% appear to be largely driven by investors’ expectations of expedited economic growth and improvements in corporate profits in coming years.1 Meanwhile, the U.S. Treasury yield curve this week reached its flattest level in more than a decade because yields on the long end of the curve have declined notably from their 2017 peak.3
  • Specifically, the yield on the 2-year U.S. Treasury note has risen fairly steadily in 2017 as it has largely reacted to Federal Reserve action. The Fed has hiked interest rates twice already this year and appears on track to raise rates again at its December meeting. Yields on the 2-year U.S. Treasury note have climbed 16 basis points since the beginning of October and approximately 43 basis points year to date.25
  • Meanwhile, the yield on the 10-year U.S. Treasury note reached its 2017 high of 2.62% in March. More often this year, however, it has remained within the tight 2.2%–2.5% range and year to date has declined approximately 6 basis points.5
  • While bond investors have clearly reacted to shorter-term market drivers – Fed rate hikes, for example – they appear to harbor continued skepticism that inflation, or economic growth, will pick up meaningfully over the medium term.


  • 1 Federal Reserve Bank of St. Louis, S&P 500 Index, http://bit.ly/2d3pN5b.
    2 Thomson Reuters Lipper.
    3 Federal Reserve Bank of St. Louis, 10-year minus 2-year Treasury, http://bit.ly/2oMWaP2.
    4 ICE Bank of America Merrill Lynch U.S. High Yield Master II Index.
    5 Federal Reserve Bank of St. Louis, 10-year Treasury constant maturity rate, http://bit.ly/29ecBfp.
    6 Federal Reserve Bank of St. Louis, WTI, http://bit.ly/292Tgue.
    7 ICE Bank of America Merrill Lynch U.S. High Yield Consumer Products Index.
    8 ICE Bank of America Merrill Lynch U.S. High Yield Healthcare Index.
    9 ICE Bank of America Merrill Lynch U.S. High Yield Telecommunications Index.
    10 ICE Bank of America Merrill Lynch U.S. High Yield Super Retail Index.
    11 ICE Bank of America Merrill Lynch U.S. High Yield Energy Index.
    12 ICE Bank of America Merrill Lynch U.S. High Yield CCC & Lower Rated Index.
    13 ICE Bank of America Merrill Lynch U.S. High Yield B Rated Index.
    14 ICE Bank of America Merrill Lynch U.S. High Yield BB Rated Index.
    15 Credit Suisse Leveraged Loan Index.
    16 S&P Global Market Intelligence, Leveraged Commentary and Data, as of November 9, 2017.
    17 Credit Suisse Leveraged Loan Index (retail component).
    18 Credit Suisse Leveraged Loan Index (consumer non-durables component).
    19 Credit Suisse Leveraged Loan Index (yield to a three-year takeout).
    20 ICE Bank of America Merrill Lynch U.S. High Yield Index (yield-to-worst).
    21 The Wall Street Journal, http://on.wsj.com/2hZD9V4.
    22 The Wall Street Journal, http://on.wsj.com/2i0YUUB.
    23 Reuters, http://reut.rs/2zwvy8a.
    24 Bloomberg, based CME data.
    25 Federal Reserve Bank of St. Louis, 2-year Treasury constant maturity rate, http://bit.ly/2anGvQ0.
    26 Bureau of Labor Statistics, http://bit.ly/2zsgHhp.
    27 Bureau of Economic Analysis, http://bit.ly/1cR0IcA.


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