March 17 (Reuters) – The U.S. Treasury yield curve flattened to a two-year low on Thursday, after the Federal Reserve raised interest rates as expected but cut its growth forecast for the The rest of the year.
* The spread between 2-year and 10-year notes fell below 20 basis points (bps), from 30 bps prior to the Fed statement and holding just above the 18.5 bps reached last week, a March 2020 minimum.
* This is mainly due to a larger and lasting rise in near-term yields after the Fed indicated it would move aggressively to quell inflation. Although longer-term yields were also higher, they gave back much of their gains from the Asian session.
* “What emerged was that the Fed lowered GDP forecasts more than perhaps the ECB did, signaling that growth will struggle, and I think the curve flattening has more to go,” said Kaspar Hense , portfolio manager at Bluebay Asset Management.
* Broadly speaking, the yield on 10-year US Treasuries stood at 2.13% in London trading, after rising to a May 2019 high of 2.25% on Wednesday.
* Fed policymakers raised interest rates for the first time since 2018 on Wednesday, but lowered their 2022 gross domestic product growth estimate to 2.8% from 4% forecast in December, starting analyze the new risks facing the world economy.
* The yield differential between the five-year and 30-year notes is presented at 25 basis points, a floor since October 2018.
(Reporting by Saikat Chatterjee; Editing in Spanish by Javier Leira)