Developments in the Treasury market are overshadowing potential Federal Reserve interest-rate cuts. A steepening Treasury yield curve could impact borrowers’ ability to benefit fully from lower short-term borrowing costs. Signs of a weakening U.S. labor market have increased expectations for a Fed rate cut, causing the spread between 2- and 10-year Treasurys to widen.

Yield curves are steepening globally due to increased fiscal stimulus and concerns over sustainability. U.S. Treasury curve has room to steepen further, driven by fears of White House interference with the Fed’s independence and inflationary pressures. A steeper curve during a rate cut could make it harder for consumers and businesses to access affordable long-term loans.

Financial markets rebounded from a volatile week with U.S. stock indexes closing higher and short-term government debt selling off. The 2-year Treasury yield rose to 3.49%, while the 10-year rate held steady at 4.21%. Concerns over debt may continue to push the Treasury market towards a steeper curve, although a weaker labor market could flatten the curve during a rate cut.

Read more at Yahoo Finance: This little-noticed bond-market development could put many borrowers on edge