Bloomberg -- As the U.S. bond market suffers its worst rout since 2009, the gauge that historically signals more pain for fixed-income investors is instead suggesting yields are near their peak.
The gap between two- and 10-year Treasury yields widened to 2.55 percentage points this month, double the median of 1.23 points since 1990 and approaching the record 2.93 points in February 2010, data compiled by Bloomberg show. The yield curve is steepening at the fastest pace since 2009 as the Federal Reserve signals its intent to keep the target interest rate for overnight loans between banks at about zero into 2015 while reducing the bond-buying economic stimulus that drove 10-year yields to the highest level in more than two years.
While the yield curve typically steepens when faster growth leads investors to demand more insulation from inflation, bond strategists say this time is different. After rising from this yearís low of 1.61 percent on May 1 to 2.93 percent last week, the increase in 10-year yields will slow, with rates reaching 3.05 percent in the second quarter of next year, according to 63 economists in a Bloomberg News survey. Losses will be limited by an economy growing at half the post-World War II average and an inflation rate below the Fedís 2 percent target, they say.
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