Editor's Note: The following analysis was offered this morning via Scott Reamer's technical service. We share the vibe on the 'Ville with educational intents and is not intended as advice. For more information regarding Scott's unique approach, please click here.
Just updating our last few weeks' look at 2s-10s spreads. We said then that the short term could see a widening of spreads but that the intermediate term trend was set to drop to 0-20 bps "by the fall." Instead of widening in the short term, the intermediate term trend has only strengthened. At this pace of spread tightening, the yield curve will invert sometime the week of August 22 unless we see a meaningful widening. The implications of this are clear from a macro standpoint and continue to illustrate decreasing time preferences and the potential for a perhaps serious asset deflation.
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