Shots Fired! Is the Yield Curve About To Steepen?

Shots Fired! Is the Yield Curve About Steepen? Trouble for risk assets creeps closer as the flat yield curve (and in several terms inverted) begins to steepen with short-term rates falling faster than long-term rates.  The US 2-year yields just broke below the previous weekly cycle low of Dec 2018.  While the US 10-year and 30-year yields are basis points away on the verge of breaking down too. TRI expects the 2-year yields to fall faster than the longer dated treasury bonds, causing the yield curve to steepen over the next 12 months. Source: Meanwhile in equity markets, the S&P 500 has managed to make new highs on more pronounced negative divergence with the RSI indicator and several other key markets.  As seen below, none of the NYSE Composite, Russell 2000, Emerging Markets or the World Ex-US ETF’s have been able to make new cycle highs.  This is very troublesome for TRI, as it signals major market weakness disguised behind the strength of US mega cap stocks. Source: The historical US10Y – US2Y yield curve provides some very interesting information as we enter the next phase of the business cycle.  On 3 occasions - 2004, 2010-12 and 2014…

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