The Dis-Inversion Of The Yield Curve Is What Really Matters
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Authored by Simon Black, Bloomberg macro strategist,
The 3-month versus 10-year yield curve is close to positive territory. More important than the widely followed 2-year/10-year curve, its disinversion should help free up primary-dealer balance sheets encumbered with Treasuries, easing the leverage constraints in stocks and bonds and allowing swap spreads to rise.
To err is human, to persist in error is diabolical. The market’s tendency to make simplistic assumptions about the yield curve and its relationship to recessions is becoming, if not quite devil-like, a perennial folly.