Inflation expectations have a larger impact on US bond yields than fiscal concerns.

Jeffrey Cleveland of Payden & Rygel stated in a report that continued growth, slowing inflation, and gradual rate cuts by the Federal Reserve should lead to a decrease in both short-term and long-term US Treasury yields, with the impact exceeding concerns on the fiscal side. The chief economist said that while a flattening yield curve may seem unusual by recent standards, it is not unprecedented. Concerns about the US fiscal deficit have raised worries in the market that long-term rates may remain elevated. He mentioned that, however, the role of inflation expectations is much more significant, with fiscal issues mainly affecting term premiums marginally. He said, "If inflation continues to slow, even without a recession, long-term US Treasury yields may still trend lower."