Wrong-Headed MSM Yield Curve Analysis

I made a big deal about the hype of an INVERTED YIELD CURVE… OH MY GAWD HEAD FOR THE HILLS!!! last summer as the public was treated to CNN, Fox News and scores of other dunderhead mainstream media outlets with robots reporting on something they know little about.

The public? It was shitting its pants thinking ‘The yield effing curve??? Inverted??? I don’t know what that is but I know it’s not good!!!’. What it was was a negative stimulant along with the constant trade war stuff that reset sentiment and gave us the opportunity to be riding this awesome mania we’ve got going in the other direction today.

Why bring this all up again? Because I was at the CNBC site checking the live curve and found this article lurking there for the public to read. It’s from December 19th, but the point of commenting on it is still valid because the curve remains in a potential steepener.

The thing that freaked everyone out about a recession is now moving in the opposite direction

The yield curve, which flashed the biggest recession signal in more than 10 years and sent shock waves through the financial markets just a few months ago, is now signaling things are just fine. In fact, it’s saying things are more than just fine, it’s pointing to a faster economy ahead.

The spread between the 2-year Treasury yield and that of the 10-year note climbed to 28.7 basis points on Wednesday, its highest level since November 2018. This move is called a steepening by financial pros and a reversal from the inversion (short-term rates rising above long-term yields) that triggered fears.

Here’s the live curve today, courtesy of the same outlet linked above…

yield curve

One problem there, guys. It’s the steepening that is to be feared as we noted all along when calling b/s on the media uproar about the summer’s inversion. The inversion was simply the most intense part of the curve flattening that runs with a boom. As suspected it was also an exclamation point as the steepening began in late August. The media are now busy telling us the opposite of last summer… come on in, the economic waters are fine!

“A resilient consumer will continue to drive moderate levels of growth and recession risks remain muted,” Michael Fredericks, head of income investing at BlackRock, said in a note Wednesday.

The chance of recession in the next year fell to the lowest level since June, according to respondents to the December CNBC Fed Survey. GDP is forecast to remain at 2% over the next two years, the survey, which polled 43 fund managers, strategists and economists, showed.

Anyway, it is the steeper from inversion that usually needs to be feared, at least according to the last two primary instances. So dear mainstream financial services industry and the public which puts its trust in them, be very careful about what you wish for… and what you read in the media filled with lazy analysis that is little more than noise to catch your attention in order to harvest your eyeballs.

spx and yield curve

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