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The second half of 2021 began with a continuation of the strong second quarter rally in the U.S. Treasury market. This performance stands in stark contrast to the first quarter when the yield on the 10-year note rose 83 basis points (bps) as the Treasury market priced in a strong rebound in U.S. economic growth and the prospect of higher inflation. Despite little change to measures of growth and inflation in recent weeks, there has been a sentiment shift and upheaval in positioning on the long end of the Treasury market after the June 16 Federal Open Market Committee (FOMC) statement. In DoubleLine’s view, the Treasury market, particularly the long end of the yield curve, tends to reflect economic fundamentals over the long term. Over the short term, the market is prone to overshoot fundamentals due to technical factors.