Flattening Yield Curve in One Picture

The flattening yield curve is a topic of much discussion. The lead chart shows various spreads it in one picture.

Spread Values

Spread Values in Basis Points

  • 10-7 Spread: 04 Basis Points
  • 10-5 Spread: 10 Basis Points
  • 10-2 Spread: 21 Basis Points
  • 05-2 Spread: 11 Basis Points

This cannot possibly mean what is used to mean (i.e. the Fed is tightening into a recession).

How do I know?

In his speech today, Fed Chairman Jerome Powell did not mention "yield curve even once". Instead he talked about "moving stars".

For discussion, please see Powell Praises the Fed, Discusses the Stars (Literally), Defends Goldilocks.

Long Term Picture

Note how the yield curve steepens mightily ahead of recessions as the Fed tries in vain to prevent one.

Mike "Mish" Shedlock

Comments (4)
No. 1-3
lol
lol

Ever increasing amount of money printing is the only option left o the table,it's moar than a crutch it's now the (easy)only way out.Inverted yield curve?So what?Soaring inflation!Who cares,the presses will keep runnin (until it doesn't).

JonSellers
JonSellers

This is the scenario I think Mish has been describing for a while. An inverted yield curve used to mean a rush to short term liquidity pushing up the 2 year and a long term deflationary outlook pushing down the 10 year. What we are seeing here is just a deflationary outlook at all time points.

RonJ
RonJ

Powell defends Goldilocks. The problem with Goldilocks is that the three bears eventually rummage through the house.

Also it is Goldilocks for who? Zero Hedge: "An alarming 52.1% of young Americans grow up in homes collecting some form of taxpayer-funded largesse." From another ZH story yesterday: "The last few months have seen a dramatic divergence between the 'comfort' of the haves and the have-notes."