I see a lot of CT looking at the yield curve inversion and trying to figure out what's next.
Markets don't tank when we're inverted, it's the re-steepening of the curve as fed cuts while markets tank that does it.
A thread on possibilities below:
(2y-10y YC vs SPX below)
Markets don't tank when we're inverted, it's the re-steepening of the curve as fed cuts while markets tank that does it.
A thread on possibilities below:
(2y-10y YC vs SPX below)
Yield curve inversions normalize through two ways:
- 2y yield (defacto current fed positioning) comes lower due to the fed either pivoting or cutting rates
- 10y yield goes higher back above the 2y yield (long duration bonds get bid during recession and growth fears).
- 2y yield (defacto current fed positioning) comes lower due to the fed either pivoting or cutting rates
- 10y yield goes higher back above the 2y yield (long duration bonds get bid during recession and growth fears).
So we have two options:
- the recession is coming fast and it will caused the fed to pivot (2y yields is rallying this week off fed members trying to dampen any pivot talk)
- recession fears abait alongside QT focused on selling bonds in long end re-steepen the long end
- the recession is coming fast and it will caused the fed to pivot (2y yields is rallying this week off fed members trying to dampen any pivot talk)
- recession fears abait alongside QT focused on selling bonds in long end re-steepen the long end
Regardless the curve staying inverted here by its nature means we have yet to see a bottom. The curve need to re-steepen through a fed pivot, or through recessions fears abating
Historically, that steepening doesn't occur w/o a major market downturn as seen in first screenshot.
Historically, that steepening doesn't occur w/o a major market downturn as seen in first screenshot.
This leaves us to an assumption that the current surge higher is most likely either a bear market rally or a frontrun of this coming fed easing. I believe that this august's CPI print will provide us insight into which is true. Hold tight, not out of the woods yet.
@RNR_0 @0xHamz @0xSisyphus @smileycapital
Curious on how you guys think about my analysis as fellow macro larpers!
Curious on how you guys think about my analysis as fellow macro larpers!
@BuckleUpBrandon listening to your space and just curious on your thoughts here on what i wrote out here
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