The U.S. Treasury yield curve flattened further on Thursday, as investors weighed the outlook for economic growth and inflation. The spread between the two-year and 10-year Treasury yields, a closely watched indicator of potential recession, continued to narrow.

The flattening yield curve reflects concerns that the Federal Reserve’s interest rate hikes could slow down economic growth. Some analysts believe that an inverted yield curve, where short-term yields are higher than long-term yields, is a reliable predictor of recessions.

Here are some factors contributing to the flattening yield curve:

• Federal Reserve Policy: The Fed’s ongoing interest rate hikes are pushing up short-term yields.
• Inflation Expectations: While inflation has risen, long-term inflation expectations remain relatively stable.
• Global Economic Outlook: Concerns about global economic growth are weighing on long-term yields.

The flattening yield curve is a signal that investors are becoming more cautious about the economic outlook. Market participants will be closely monitoring economic data and Fed policy decisions for further clues about the future direction of interest rates and the economy.