Yield curve steepens again, under inflationary pressure
Look, if we are going to kill the hysteria of the day it is not going to be killed in a day. It is going to be killed over weeks and months of grinding up and down, flitting brain cells trying to quantify and make sense of daily happenings while the picture churns so slowly as to try to make us lose our focus.
The picture remains inflationary (duh, Captain Obvious). The renewed post-inversion steepener in the 10yr-2yr yield spread is by definition, inflationary. That is because the steepening is happening once again with both short and long-term Treasury yields rising as bonds come very close (but no cigar yet) to a secular bear market signal).
This is not at all deflationary. It is also not Goldilocks. It could all change with next week’s inflation data fest, but as of today, post-jobs, post-FOMC and post-a year of unbridled inflation headlines, the picture is of an inflationary curve steepening (assuming the recent inversion was a double dip to finish the job the aborted secondary inversion in 2020 started).
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