The 10yr-2yr Yield Curve continues to posture for steepening
The recent secondary inversion (initial inversion was August, 2019) continues to look like it has birthed a bouncing baby steepener. The question, however, is whether a new steepening would be inflationary or deflationary.
Today is inflationary signaling with nominal yields up. That’s a microcosm driven by geopolitical stuff. I am not going to bet heavily one way or the other until it shakes out. But I’d still lean Goldilocks morphing deflationary since the last steepener was purely inflationary. But in this macro previously stimulated by central banks and now stimulated by global strife and angst, who knows for sure how it will shake out.
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Many thanks for the post but I find the terminology rather confusing. Does “steepening” mean that the difference [10-year yield in whatever units -minus- 2-year yield in those units] has increased or decreased?
Presumably either one of those is represented on the y-axis of the graph, but no units are specified.
Above the chart it says “US 2yr/10yr spread” but then the opposite order appears in the subtitle “10Y2YS exchange” and in your post title. And the slash “/” is normally the mathematical symbol for division, but that cannot be the case here if a difference is being calculated.
In regards to the “0.30” in bold type and “triangle=presumably up symbol, +0.05” over the chart, if the triangle means “up” then the plus sign is superfluous. What combination of symbols appears if the value goes down? A down triangle with a minus sign would result in a plus.
Again, what are the units of those numbers? Percentage points or basis points (I can’t even remember exactly what basis points are)? And +21.51% is presumably a relative increment, percent change in a percent, so to speak? Like saying when the number “3%” goes up to “5%” that is a relative increase of 66.7% rather than an absolute increase of 2%? (That is how clinical efficacy data can be faked BTW, but that is neither here nor there).
The nomenclature is as confusing as currency exchange “rates” where the numerator and denominator are never specified. Like when they say “ruble off the chart!”, where it could mean either that there are suddenly zillions of rubles available per USD, or the opposite, suddenly large number of US cents needed to buy a ruble…
CNBC improperly uses a ‘/‘ sign. TheYC is the 10yr – 2yr.