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Yield Curve

Nov 06 2023

A Major Yield-Curve Steepening Cycle Has Started

  • Nov 6, 2023

The 10Y-2Y yield curve broke above the key level of -0.4% and that means a double-bottom pattern is in play. While we are confident that a major steepening cycle is here, we have to acknowledge that the nascent move could fail. A steepening move is also the market’s way of signaling easier conditions ahead.

Apr 06 2023

Yield Curve Re-Steepening—At A Critical Crossroads

  • Apr 6, 2023

We studied market behavior around yield curve re-steepening and identified six historical cases. Of those, three were successful and preceded major recessions. The other three instances failed and reversed to new lows. The gist of the study: We are at a critical crossroads.

Feb 07 2023

1966-67: When The Yield Curve “Failed”

  • Feb 7, 2023

Given the tendency of economists and strategists to dismiss the message of an inverted yield curve, it’s surprising there’s been no scrutiny of the “dog that didn’t bark”—the inversion of 1966. That’s the last time an inverted curve did not lead to a recession.

Jan 07 2023

The Yield Curve And The Problem Of Timing

  • Jan 7, 2023

Frequently, there’s money to be made in the stock market in the months following the initial curve inversion. After the inversions of August 2006 and June 2019, the S&P 500 rallied another 23% and 19%, respectively, into its final bull market high. If this cycle plays out in textbook fashion, the business-cycle peak would arrive in September.

Jan 07 2023

A “Curve”-Ball We Didn’t See Coming...

  • Jan 7, 2023

Market veterans know there’s just one thing more probable than a recession after the yield curve inverts: Yield curve denial among a large group of sell-side economists and market strategists! Indeed, the earliest of those dismissals occurred last March—a month before the first of more than a dozen iterations of a yield curve inversion. 

Nov 05 2022

Which Yield Curve?

  • Nov 5, 2022

Last month’s inversion in the 10-Yr./3-Mo. Treasury spread further tilts an already lopsided scale in favor of a U.S. recession in 2023. That spread has been considered the gold standard from an economic forecasting perspective, and is the basis for the New York Fed’s Recession Probability estimate (which, by the way, should break above its critical 35% threshold when it’s published later this month.)

Nov 05 2022

Six Themes Around A Full Yield-Curve Inversion

  • Nov 5, 2022

The main yield curve drivers—fiscal and monetary policies—might be suggesting a steepening move is coming soon, while bank stock performance may also be hinting at a turn in the curve. However, a durable selloff in the U.S. dollar would be needed to support a steeper yield curve, so the tightening pain could last a while longer.

Oct 07 2022

Tightening Into A Slowdown: Month Eight

  • Oct 7, 2022

We think the U.S. economy will slip into recession sometime in the next year, but the level of “excess savings” provided by pandemic aid renders the already difficult task of timing more elusive than ever.

Aug 19 2022

When There’s No Slack, It’s A Bad Time To Slack Off

  • Aug 19, 2022

The scene in our neighborhood in the last two summers has become one of relaxed and well-tanned professionals out in their yards overseeing home improvement and landscaping projects. No surprise: Not a single one has told us they’re less productive when working from home!

Aug 05 2022

The Yield Curve: Two “Perfect Records” At Stake

  • Aug 5, 2022

Yield curve action is getting harder to dismiss by the day. But which curve is the most relevant? We tried to answer that question in disciplined fashion in April. To our surprise, the “2s10s” spread that’s ubiquitous in bond-land scored near the bottom of the pack.

Aug 05 2022

Yield Curve Inversion—Count Down To A Bull Steepener

  • Aug 5, 2022

Now that the yield curve has inverted, its dynamic is apt to change from bear flattening (higher rates, flatter curves) to bull steepening (lower rates, steeper curves) fairly soon.

Jul 08 2022

Looking “Bustier?”

  • Jul 8, 2022

Key indicators are indeed trending in “pre-recessionary” fashion. Among them is the ISM New Orders Index, which dipped into contraction territory in June while inventories increased. Others are the JOLTS that shows a strong (but weakening) labor market, and unemployment claims—which have ticked up.

Apr 07 2022

The Terrible “Two-Year”

  • Apr 7, 2022

In a simple test of 15 yield-curve variants, we found that the 2s10s spread ranks second to last, based on its correlation with one-year-forward real-GDP growth since 1978. The three best measures employed the 3-month bill as the “short” rate. The spread between the 5-year note and 3-month bill showed the strongest correlation with subsequent economic growth.

Apr 06 2022

Yield Curve—Focus On More Reliable Themes

  • Apr 6, 2022

Predicting a recession is a very tall task, let alone using a single yield-curve indicator with long and highly variable lead time. Instead, we would rather focus on some of the more reliable themes: The macro-policy setting; U.S. dollar; and Bank stocks.

Mar 05 2022

Yield Curve Crossing The 50-Bps Rubicon—No Imminent Trouble

  • Mar 5, 2022

The U.S. 10/2-year curve just fell below the key threshold of 50 bps. Over the last 25 years, the yield curve proceeded to invert after this “Rubicon” was crossed. That doesn’t mean imminent trouble. The lead time of a yield-curve signal is lengthy, but it—and real yields—definitely warrant close monitoring.

Feb 05 2022

Too Early For Curve Watching?

  • Feb 5, 2022

Last month, we published a table showing where we thought a variety of economic and financial-market measures lay along the economic recovery “continuum.” Although the upturn has officially entered just its 22nd month, the bulk of those measures looked “late cycle” in nature.

Feb 05 2022

What “Causes” Inflation To Decline?

  • Feb 5, 2022

Last year’s consensus view that inflation would prove “transitory” missed the mark. There’s no reason for shame; inflation forecasting hadn’t been a required investment skill for the previous 30 years.

Sep 10 2021

Why Is Confidence “Inverted?”

  • Sep 10, 2021

Stimulus and soaring stock prices have contributed to the fastest consumer-confidence rebound of any economic recovery on record. Yet the manner in which this bounce has unfolded is anything but “early cycle.”

Dec 05 2020

Popular Trades — No “No-Brainers”

  • Dec 5, 2020

We studied several “popular trades” and there are good reasons to be on board with most of them, but none can be viewed as a no-brainer.

Oct 07 2020

Remember The Yield Curve?

  • Oct 7, 2020

It would be a mistake to ignore (as most pundits will) this important forecasting tool until the next time it threatens to invert. The level and direction of the yield curve provide helpful information throughout the entire economic cycle.

Jul 08 2020

No Yield Curve Control? The Fed Spoke Too Soon

  • Jul 8, 2020

There has been chatter about the Fed implementing the so-called Yield Curve Control (YCC). Although the latest FOMC minutes suggest that YCC is not on the agenda for now, we believe the chance of YCC is probably much higher than the market currently anticipates.

Mar 06 2020

Double-Digit Yield & Double-Dipping Curves

  • Mar 6, 2020

As the coronavirus materially increases the odds of a recession, some important parts of the U.S. yield curve (10Y-3M; 5Y-2Y) double-dipped into inversion. The two prior episodes occurred in late 1989 and mid-2006 and, in both cases, a recession followed within 18 months.

Mar 06 2020


  • Mar 6, 2020

We can’t count the number of times in the last week we’ve heard analysts worry about “what the Fed might know that we don’t.” In the words of John McEnroe, “You cannot be serious!”

Dec 06 2019

How Will It Be Remembered?

  • Dec 6, 2019

A way to gain perspective on the present is by trying to view it from the future. Ask yourself, “What are the signs of impending decline, now ignored by investors, that will one day be memorialized by the same investors as the most obvious in retrospect?”   

Nov 15 2019

Questioning The Monetary Rebound

  • Nov 15, 2019

This year’s upswing in money-supply growth has been one of many factors that’s prevented our economic work from triggering a recession warning. Following a two-year decline, year-over-year growth in M2 bottomed near 3% late in 2018 and has trended upward all year, reaching 6.7% in the latest week (Chart 1).


Oct 05 2019

More Yield Curve Musings

  • Oct 5, 2019

The U.S. yield curve inversion has lasted long enough that even a few economic optimists now concede it will ultimately prove significant.

Oct 05 2019

More Trends We Don’t Find Friendly…

  • Oct 5, 2019

The yield curve’s ten-month moving average inverted in September, hence the yield curve inversion can no longer be dismissed as transitory; the Boom/Bust Indicator remains below its descending 10-month moving average, confirming economic weakness predicted by the yield curve; and, the “Present Situation” component of September’s Consumer Confidence survey slipped below its 10-month moving average for the third time in 2019.

Sep 07 2019

Monetary Madness

  • Sep 7, 2019

We always do our own work and draw our own conclusions. Lately, though, we’ve wondered what the late “Monetary Marty” Zweig might say about the stock market’s current liquidity backdrop.

Jul 05 2019

Recession Evidence: How Much Is Enough?

  • Jul 5, 2019

Over a 12-month horizon, we now believe a U.S. recession is very likely, but aren’t confident enough to make the call when the forecast window is cut in half. Second-half stock returns could be decent if the business-cycle peak is still a year away. Then again, there’s peril in waiting for “too much” confirmation of recession.

Jun 07 2019

All That You Don’t Hear About The Curve

  • Jun 7, 2019

While the 10Y-3M curve inversion does warrant extra attention, movements in other parts of the curve also need to be taken into consideration.

Jun 07 2019

Bust To Boom, And Back Again

  • Jun 7, 2019

Last month, we observed that crude oil was the only item propping up broad-based commodity indexes, and that something was bound to give with the U.S. dollar pushing to new highs.

May 06 2019

Signs Of Spring For Financials

  • May 6, 2019

Signs of spring are popping up everywhere in the Financials sector. S&P Financials was easily the top- performing sector in April and several sub-industries have been bubbling higher in our Group Selection discipline.

Apr 05 2019

Inveighing Against The Inversion

  • Apr 5, 2019

Some recent headlines are word-for-word regurgitations of those published in response to the early-2006 yield curve inversion. In that case, the naysayers were temporarily correct, as both the U.S. economy and stock market pushed higher for another year and a half before rolling over.

Mar 07 2019

Watch What They Do, Not What They Say

  • Mar 7, 2019

While the celebration over Jerome Powell’s “Christmas Capitulation” lingered throughout February, we’re still awaiting signs the capitulation consisted of anything more than words.

Jan 08 2019

Yields Might Be Throwing A Curve

  • Jan 8, 2019

While the number of recession forecasts is on the rise, there’s a general reluctance among economists to project a downturn in the absence of a yield curve inversion.

Jan 08 2019

About That Great Jobs Report...

  • Jan 8, 2019

The December employment report temporarily eased fears of a severe U.S. slowdown. That’s a mystery to us.

Dec 07 2018

Deep-Six The “Threes-Fives”

  • Dec 7, 2018

We’ve sometimes called the yield curve our “favorite economist,” so we were amused when some enthusiastic data miner in the Treasury market tried to slip us a cheap imitation in late November.

Sep 08 2018

Beware The Policy “Narrative”

  • Sep 8, 2018

It’s been amusing to watch the narrative surrounding Fed policy evolve as the market has rallied.

Sep 07 2018

Yield Curve Proxy—A Tool For Equity Investors

  • Sep 7, 2018

The increasingly greater attention given to the yield curve by equity investors has prompted us to come up with an equity basket that can track the movement of the yield curve. Overall, it does a reasonably good job of capturing the major moves.

Aug 07 2018

Assessing The Correction

  • Aug 7, 2018

How do today’s cyclical conditions stack up with those accompanying other stock market declines?