...and today we saw the 2s30s curve go positive once again and closed at its 'steepest' since Aug 2022...

Additionally, the 'real' yield curve steepened dramatically, also pushing back up towards un-inverted...

The steepening is extremely evident in the week's moves across the curve with 2Y up just 3bps and 30Y up 33bps...

There was also a notable swing in rate-cut expectations for next year. While we zoomed out for context in the chart below, this week saw rate-cut expectations drop from 84bps to 67bps and then reverse back to 78bps (of cuts) after Powell...

As we discussed previously, this is a warning sign because inverted yield curves precede recessions, but it's the re-steepening that signals the downturn is going to hit sooner rather than later.

Historically it is the 3m30y yield curve that has started steepening first before a recession, beginning to rise about five months before its onset. It began in mid-January, which would put a downturn starting as early as June. The spread between 3-month and 30-year yields is about minus 84 basis points, versus the January low of minus 115 basis points.

And 3m30Y has been steepening dramatically this week...

And before we leave bond-land, we note that financial conditions are now at their tightest since Nov 2022.... and it looks like its starting to drag on the real economy...