2012.06.01 17:52:19 MARKET TALK: Treasury Yield Curve Flattest In Four Years

11:51 (Dow Jones) Looking for signs of fear about the US economy? Check out the Treasury yield curve: With yields on short-dated notes pinched near zero and the 10-yr yield trading below 1.5%, the yield gap between the two-year and 10-year Treasurys shrank to 121 bps, the narrowest since June 2008. The debate is about chicken and eggs: Some analysts say the flattening curve is simply a reflection of flight-to-safety flows, yet the curve shape traditionally has been tracked by many investors as a gauge on the economic outlook. A steepening curve is a more welcome development as a sign of growth in the economy, while a flattening curve is read as a sign that growth is slowing down. And an inverted curve -- with 10-yr yield trading below two-year yield -- had preceded several US recessions over the past three decades. (min.zeng@dowjones.com) Call us at (212) 416-3100 or email bradley.davis@dowjones.com (END) Dow Jones Newswires June 01, 2012 11:52 ET (15:52 GMT)