In Search of the Allegedly Steepening Yield Curve


There has been a lot of commentaries recently about the steepening yield curve. Let's investigate with pictures.

The chart shows the spread between the 10-year treasury yield and the two- and five-year treasury yields. The steepening is hard to spot so let's hone in.

Detail of Yield Curve Steepening

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Wait a second you say. The short end is not rising but the long end is. Yes, sometimes. I have a picture from October 17.

Steepening Yield Snapshot

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Let's add the 3-month set of data points and investigate further.

Steepening or Noise?

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Let's not confuse random noise nor a rise in yields across the board with a steepening yield curve.

What About Recession Risk?

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Some believe recession risk is minimal because the yield curve is steepening and there has been no inversion.

In regards to steepening, there is not much credence except in isolated incidents like that shown in the "Steepening Yield Curve Snapshot".

In regards to inversion, there is no rule that says the yield curve must invert before before recession. Japan provides an excellent example.

Japan Recessions

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Image courtesy of Pater Tenebrarum at the Acting Man blog.

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In regards to the above articles, shorts are piling on in belief the Fed will keep hiking and gold is doomed. The boat is massively lopsided and is about to tip over.

Mike "Mish" Shedlock

Comments (3)
No. 1-3

An inverted yield curve used to mean something prior to 2000 (And prior to 1990 in Japan). When CBs tried to follow the general trend of interest rates based on money supply and demand, but now with CBs forcing unnaturally low rates, it's lost all indicator value.

Maybe if the FED succeeds in normalizing rates, it will regain meaning.


If interest rates were normal. And normal would be around 6%. This near inversion would mean something.

A decade of QE and ZIRP to "create wealth" for the 1% has destroyed normal.


Duke Energy owns 58,200 megawatts of base-load and peak generation in the United States, which it distributes to its 7.2 million customers.

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