The steepening of the yield curve is one of the most compelling macro trades of the next 6-12 months in my view.
ย
After being deeply negative, the overall yield curve appears to be in the process of de-inverting.
ย
Using the 2 vs. 10-year yield spread as a proxy, past instances of yield curve steepening have witnessed abrupt changes exceeding 300 basis points from the bottom to the trough.
ย
We believe this is highly likely to happen again today.
ย
Keep in mind:
ย
Today, we are experiencing the lengthiest period in history where the percentage of yield curve inversions in the US Treasury market has remained consistently above the recessionary threshold of 70% for a continuous 15 months.