Treasuries were mixed in late afternoon trading with the longer-dated securities outperforming the short maturities. Observers of the bond market believe today's turnaround in the

yield curve, which has gotten steeper since the beginning of the year, reflects the belief the

Federal Reserve has completed the bulk of its interest rate cuts.

Lately, the two-year note, a short-term security that reacts most dramatically to expectations of monetary easing, lost 1/32 to 99 11/32, moving the yield up to 4.355%. Yields and prices move in opposite directions. On the longer end of the market, the 10-year benchmark note was flat at 96 31/32, yielding 5.401%, while the 30-year bond, otherwise known as the long bond, gained 1/32 to 94 15/32, lowering the yield to 5.764%.

"We've had a pretty dramatic turnaround with regard to the curve. The long end is starting to improve, and the short end has given ground," said Hamilton Davis, director of government bond trading at

First Union Securities

. "The Fed's latest easing kind of derailed the flattening trend, but then it reasserted itself yesterday and again today. But remember you're talking about a mini-trend."

The yield curve, which charts the difference in yield between two separate Treasuries, such as the two-year note and the 10-year benchmark note, has been getting steeper as the shorter-term maturities outperform the long-dated securities. The classic view is that when yield curves flatten, the bond market is expecting a recession. When the yield curve becomes steeper, the bonds are indicating that a recovery for the economy is on the way.


examined what a steeper yield curve says about the outlook for the economy.

Jim Bianco, president at

Bianco Research

, believes that today's stronger performance in the long end of the market suggests investors believe the Fed may be done with its easing, and may even consider raising rates early next year.

Longer-term maturities have been selling off amid

concerns about inflation, which have been stoked by the Fed's aggressive rate cuts. The Fed has so far cut interest rates by 250 basis points since Jan. 3. The June

fed funds futures are pricing in a 46% chance of a 25-basis point cut at the Fed's two day meeting in June.

Next week's list of economic data could help firm expectations for the Fed's next move. On Friday, the preliminary

gross domestic product figures for the first quarter will be released. The

durable goods orders, a measure of the value of orders received by manufacturers for durables like motor vehicles and appliances, will also be watched as the latest hint of the health of the manufacturing sector. And the

consumer sentiment index for this month, released by the University of Michigan on Friday, will provide more clues about the state of spending and the possibility of higher prices in the U.S.