Blog: Is the Yield Curve un-inverting or steepening? What would George Carlin say?
Whichever you prefer, its not good news.
I've read a number of articles this week observing that long-term bond yields are rising faster than short-term yields. In many cases they are saying that the yield curve is "un-inverting." Huh? Isn't that just steepening? It reminds me of a George Carlin joke about flammable, inflammable and (my personal favorite) non-uninflammable. Three words that all mean the same thing.
But it doesn't matter whether you prefer un-inverting to steepening, its still not good news. In MUSI the yield curve plays a prominent role in the interest rate risk factor as I discuss in "The Nature of Bond Risk" in the publications section. I also talked about the interest rate factor in a post back in June. But if you read the paper you'll see that the yield curve steepens and flattens mostly due to the 2 year T-Note. Not this time. The action is at the long end. The question is why?