Home » Chart Of The Day, Most Recent Stories

IS THE CURVE STEEPENER TRADE OVER?

21 June 2009 by Cullen Roche 1 Comment

Bloomberg’s chart of the day notes the extreme spread between10 year treasury yields and CPI.  We’ve noted before that the reflation trade is overdone and the inflation fears are unfounded at this juncture.  The last time the spread was this high we went through over 10 years of falling yields.  Could we be in for the same kind of price action going forward or will inflation eventually take hold of the economy?  Thoughts & comments are welcome.

spreads

Cullen Roche

Cullen Roche

Bio - Coming Soon.

More Posts - Website

Follow Me:
TwitterYouTube

Disclosures - Unless otherwise noted, authors have no positions in any securities mentioned and readers should never consider this to be investment advice. Always consult your financial advisor before acting on any ideas. Comments Guideline - Readers who denigrate authors or other readers will be banned without warning. This site does not tolerate any sort of reader abuse. The goal of this site is to create an environment that is conducive to learning and better understanding of the monetary system and the investment world. We expect readers to behave maturely and responsibly. We welcome and encourage intense and intelligent discourse, but the site adheres to a strict 1 strike policy. While it is your right to speak freely, it is not your right to behave childishly. Above all else, please enjoy the site. It is intended to be used as an educational tool and we hope the intelligent and mature debate will further that purpose. We hope readers will make an effort to respect that goal. Comments with excessive linking or foul language will be moderated before posting.
Comments
  • joe

    TPC,

    Compared to the last 10 years, real rates on 10 year Treas look attractive. But if you look at the downside risk of inflation or a currency shock flipping into overdrive overnight, may be not. Here’s a graph of annual inflation rates since 1872. http://dshort.com/inflation/inflation-chart.html

    I’d be wary of treasuries unless your portfolio has a hedge to protect against high inflation or big devaluation.

    06/21/2009 at 7:38 AM