Chart of the Week16 Dec 2022
2s10s Steepeners for the New Year
The shape of the US yield curve is at such an extreme inverted level, any further flattening likely requires inflation to get even worse from here. We suspect the reality for inflation will turn out better and that in 2023 inflation will retreat further as the probability of a recession rises. US curve steepeners strike us as excellent risk-reward trades, even if growth is better than feared and a soft landing is achieved.