As nominal yields resume rising, the signal is an inflationary yield curve steepener just lately, but not necessarily going forward

As for the dominant theme of the yield curve steepener beyond the very short-term, this look at the 30yr Treasury yield “Continuum” shows an undecided situation, as the yield continues to be in a flag on the monthly chart. A yield curve steepener with rising nominal yields would indicate inflationary. A yield curve steepener with declining yields would indicate deflationary.

As for the curve, it continues firm after we last looked at it on Wednesday.

Regardless, the steepening yield curve indicates bad things to come. Remember how bad things did not come after the media made such a racket over the inverted yield curve? Well, that was wrong. It was a sign of an intact “boom” and at the time I said over and over that the media were either ignorant or fear mongering. Keep in mind now that the media gave the “all-clear!” when it announced the relief that participants should have because the curve un-inverted. From a September post:

But eventually, a rising yield curve is going to bring about the “bust” side of the boom/bust equation. As I said all through he media’s negativity campaign about the inversion, it’s the subsequent steepening and de-inversion that tend to eventually wreck the economy, not the inversion. Right now it but a disinflationary steepener. When it morphs to deflationary and inflationary in its coming phases, we will then see how durable those fairy stories are.

We are in the early innings. Or indeed, with the speculation still ramping in certain sectors/markets, the game has not even begun. But… patience, you see. It’s a thing.

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