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A snapshot of the 10-2yr yield curve this morning as long-term rates appear to be blowing off to the upside and short-term rates drop. In other words, bonds are getting hammered on the long end and bought on the short end.

As the 30yr yield smashes through our target in-month* it appears to be in unruly, impetuous blow off mode.

* It is important to distinguish ‘in-month’ on this chart showing monthly candles. Theoretically, the yield could put on this spike to where ever it is going and reverse in-month or within the Oct.-Nov. time frame and be painted in hindsight as an epic head fake and reversal.

But the main point of this update is the yield curve. It does not look like much and certainly is still in a flattening (inversion) trend. But it is notable that short-term bonds are being bought while the herds finish doing what they are doing to the long bond, which is stampeding away from it for fear of inflation and by extension, the Fed.

I continue to believe that the next steepener, whether it’s starting now or after deeper inversion, will be deflationary. My bones feel as though there is a massive lurch off sides on the macro picture and an interim (at least) deflationary period is still more likely than a ‘crack-up’ and uninterrupted inflationary future.

I have no idea whether this stuff interests you or bores you. But I have to tell you that I am downright geeked out and cannot wait to see how this resolves. It’s like the macro doing what you (I) thought it would do, but taking more time than the human brain can factor and parse on a daily basis. It’s amazing, actually.