Bond Market Signal: The Yield Curve Is Telling You Something

The Steepening Trade

After 18 months of inversion, the 2s10s spread has normalized and is now firmly positive. This steepening typically signals the transition from late-cycle to early-cycle — a period that historically favors cyclicals and financials over defensives.

Historical Steepening Episodes

The key differentiator: in 2007 and 2001, steepening was driven by Fed panic cuts into a recession. Today's steepening is orderly, driven by improving growth expectations. That's the bullish scenario.