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Quarter Ends With Flatter Yield Curve

Yields ended the quarter by drifting lower yet again this week on the back of further trade tensions, weakness in overseas equity markets, and a spike in oil prices.  The yield curve ended the week the week at its flattest level so far this cycle, with just 32 bps of yield separating the yields of the two-and ten-year yields.  The two-year note rose by 25 bps during the quarter on the back of the Fed's tightening, while the ten-year note added just 10 bps.  With further Fed funds rate increases likely this year, attention is squarely focused on the yield curve's potential inversion, and its ability to foretell a recession. 

The week's economic indicators were mixed, with a reduction in pending home sales stoking fears that housing market weakness may not just be a supply issue.  Monthly personal income and spending statistics were strong for the month of May, as the 0.4% increase in incomes outpaced the 0.2% increase in spending.

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