US yield curve flattens on jitters about Fed 'policy error'

NEW YORK: The gap between US short- and long-dated Treasury yields narrowed on Wednesday, signaling some concerns the US Federal Reserve may risk making a mistake if it did not lower interest rates further to combat overseas risks to the US economy.

"This confirms strong domestic growth and a tight labor market mean very little in determining how many times the Fed cuts from here," Ian Lyngen, head of US interest rates strategy at BMO Capital Markets, wrote in a note about the Fed's latest policy statement.

"Note the flattening of the curve implies investors are worried about a potential 'policy error' if the Fed doesn't act further," Lyngen said.