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Yield Curve Flattens as Fed Move Expected

The yield curve continued to flatten this week, with the short end of the curve rising slightly while longer-dated bond yields falling by up to five bps.  The yield declines came early in the week, despite February's CPI report which indicated that  inflation continues to rise at a greater than 2% rate, as expected.  Although CPI isn't the Fed's preferred  inflation measure, it still provides a valuable indication of economy-wide price pressures.  With the FOMC widely expected to raise the Fed funds rate target at next week's meeting and inflation readings arriving within expectations, there doesn't appear to be a reason for the curve to re-steepen at this point. 

Besides the week's economic news, the political climate also seems to be injecting some volatility into the market as White House personnel turn over and protectionist trade measures are put into place.

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