Baosheng Group says the US Treasury yield curve is flattening after the Fed’s hawkish decision.

Julius Baer Group fixed income analyst Afonso Borges pointed out in a report that after the Federal Reserve made a “distinctly hawkish” rate decision last week, the U.S. Treasury yield curve flattened, indicating that the Fed’s enhanced credibility is suppressing long-end yields. Borges stated that this phenomenon supports Julius Baer Group’s preference for medium-duration assets. He noted: “Unlike the typical rate hike cycle following the global financial crisis, last week’s decision was by no means dovish.” Borges added that previously, betting on a steeper yield curve had been the market’s main way to express concerns about institutional credibility, while the reversal of this trend now shows that the Federal Reserve’s willingness to tighten policy has eased such concerns. “For portfolios, this supports our overweight stance on duration, with a particular focus on medium-term bonds.”