The steepening trend of the Treasury yield curve suggests that the market is bracing for stronger economic growth and the possibility of higher inflation in coming months, observers say.

"The shape of the yield curve is telling the market that long-term rates are headed higher." said Charles Lieberman, director of financial markets research at Chemical Securities. "The current steepening of the curve shows that the market is getting rid of expectations for an easing [of monetary policy] built into the market and slowly building in expectations for a tightening."

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