What The Curves Want

Is What The Economy Needs

May 2nd, 2023

This chart just really says it all.

As you can plainly see, the yield curves ‘want’, yes want, to move wider and are being led by the very same curves that first broke higher back in late 2018 and early 2019. The Treasury yield curves are by far and away the best real-time indicator we have as far as (a) just how well the economy is performing relative to its potential and (b) whether or not monetary policy is helping or hurting the situation. In a situation like we see here, it is evident that the curves are moving higher on their own accord. Given that policymakers at the Federal Reserve are continuing to support a tightening aspect towards policy, the independent move wider (or growing want to move wider) reflects that not only is the economy falling further behind its potential, but that actions by the Fed are now compounding the issue. This leads us to firmly believe that