With US treasury yields on a tear, one might think the curve is steepening. It is and it isn't. Pictures will explain.
30-Year Yield Minus 5-Year Yield
30-Year Yield Minus 2-Year Yield
30-Year Yield Minus 1-Year Yield
10-Year Yield Minus 5-Year Yield
10-Year Yield Minus 2-Year Yield
5-Year Yield Minus 2-Year Yield
5-Year Yield Minus 1-Year Yield
2-Year Yield Minus 1-Year Yield
- The downtrend on 30-year spreads is still mostly intact. However, the 30-year vs 1-year spread (or shorter) is steepening.
- Most other spreads have turned up but the spread differentials are mostly tiny.
- Spread differentials are greatest at shorter maturities.
Yield Curve Flattening or Steepening?
Yes, both, depending on where you look.
More realistically, and on average, the yield curve started to steepen on January 2 or January 3.
"Bet Your Heinie" Treasury Bull is Over?
Not so fast. The treasury bull will not be over until it is certain the long end of the curve has bottomed. Despite proclamations by Bill Gross and others, it is far too early to make that call.
Bill Gross has incorrectly proclaimed the "end" several times. If another recession hits any time soon, I expect he will be wrong once again.
For further discussion, please see "You Bet Your Heinie" Bill Gross Needs a Fatter Crayon.
Mike "Mish" Shedlock