The yield curve has steepened to where 10-year yields exceed 2-year yields by 52 basis points. That's a healthy margin. This steepening shows Fed policy finally feeding through to the long end of the curve. Rising inflation expectations seem to be the catalyst.
The late cycle rate hike regime
Just last week, Fed officials were defending their policy stance given a renewed flattening in the yield curve. The fear was that the economy was rolling over and that the Fed's stance would exacerbate the problem. The Fed said flattening was typical of rate hike regimes and was no cause for concern.
And, indeed, the 1990s was just as flat for the entire late 90s bull market. I said the Fed and other central banks would look past recent economic slowing and continue to raise rates.
But as this...
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Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty five years of business experience. He has also been a regular economic and financial commentator in print and on television for the past decade. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College.