The Yield Curve’s Steepener is Cooked, for Now

The 10yr/2yr spread is making a lower low, that breaks the steepening trend of 2019 and the signal would normally be thought to be Goldilocks; where inflationists get killed, gold/silver bugs get killed and many global markets under perform the USS Good Ship Lollipop. “Normally”.

yield curve

It could also be an anomaly or more likely, a Fed-driven whipsaw to get everybody back in line, and back in bonds. Somebody’s got to fund this debt edifice and fuel the next inflationary operation * after all.

The market had driven up gold and steepened the yield curve with expectations of a dovish Fed to come. But then Powell gave Trump the finger and here we are, with a deflationary whiff in the air. Under either inflation or deflation, if they become at all radical the yield curve will not remain flat (barring the “yield curve control” agenda some see; come to think of it, was last week a step in that direction?).

So is the Goldilocks signaling real or Memorex, folks? I’ll tell you one thing, dem CME boyz is seein’ 100% chance dey doez a cut in Septembah. 100%.

cme group fed rate probabilities

* With respect to the previous post, by “inflationary operation” I do not mean ‘successful’ inflationary operation. I mean balls out inflationary ‘attempt’.

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