The 10yr/2yr yield curve is taking on a steepening bias
Just a little report from beneath the market’s surface. If you’re like me and you want to know the macro beneath the casino’s facade at all times, you watch stuff like this (along with many other indications).
The yield curve has been going sideways since the April steepening high. After the long sideways move we had/have options:
- Ease in an interim flattening, bringing perhaps a Goldilocks flavored year-end bull scenario, or
- Resume steepening under either deflationary or inflationary pressure.
Here is the sideways-going yield curve thus far holding its 50 and 200 day moving averages and ticking upward today, thus holding its viability to resume steepening.
With the nominal 10yr yield (below) going a volatile sideways with a downward bias, the backdrop has been disinflationary. Not outright deflationary (bad) and not inflationary (bad in a different way). But gently disinflationary. Sort of a Goldilocks-lite. That plays with the sideways trend above.
So you would think a new steepener could have a deflationary backing (yield curves can steepen under deflationary or inflationary pressure, depending on what nominal yields are doing).
The nominal 10yr yield is biased downward (disinflationary). But you-know-who are very interested in that little bounce pattern shaping up in the yield. They are obsessively staring at it as I write.
If that pattern resolves upward and the curve steepens, we could get an inflationary jolt. Making the current environment all the more challenging, we have FOMC smack dab in the middle of would-be party season. The goons will have an obsession of their own… on the inflation problem they were long ago (2020) primary in creating.
Meanwhile, all due caveats about men staring at chart patterns. Their lying eyes often deceive them. But this is what is happening in yield dynamics at the moment and I thought it worth posting about. I feel like an inflationary steepening could at least initially benefit the precious metals/commodity/resources trades while a Goldilocks flattener would not. Maybe we just go sideways into year-end.
I just present what I see and lay out options. I don’t try to make grand statements until/unless I get a firmer view. Meanwhile, keep staring guys (and goat)!
For “best of breed” top-down macro analysis and market strategy covering Precious Metals, Commodities, Stocks and much more, subscribe to NFTRH Premium, which includes a comprehensive weekly market report, detailed NFTRH+ updates and chart/trade setup ideas, and Daily Market Notes. Receive actionable (free) public content at NFTRH.com and subscribe to our free Substack. Follow via X @NFTRHgt and BlueSky @nftrh.bsky.social, and subscribe to our YouTube Channel. Finally, watch for ANS coming soon and check out Hammer’s trade (long and/or short) setups.
