Once upon a time there was a macro market pushing the limits of central bankers’ tolerance for inflation. Decisively, in stepped big brained Ben Bernanke (BBBB) to quash the outbreak with one masterful stroke of all-powerful market manipulation called Operation Twist.
We’re going to “sanitize” inflation right out of the macro said BBBB. And so they did, or at least they kicked off the epic flattener that came with global deflation and a US Goldilocks economy that really kicked in in 2013.
Well, a little over a year ago the yield curve stopped flattening as it ticked an inversion to much media fanfare. It has been steepening ever since, and with the Fed’s adoption of 2% inflation targeting now in the bag, if they are trying to control the yield curve, they are trying to control it up, not down, in an inflationary signal, not a deflationary one.