Traders work on the floor of the New York Stock Exchange
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The yield curve, which flashed the biggest recession signal in more than 10 years and sent shock waves through the financial markets just a few months ago, is now signaling things are just fine. In fact, it’s saying things are more than just fine, it’s pointing to a faster economy ahead.
The spread between the 2-month Treasury yield and that of the 10-year note climbed to 28.7 basis points on Wednesday, its highest level since November 2018. This move is called a steepening by financial pros.
“The Fed is on hold, the economy is doing well, and trade tensions aren’t increasing. In such a world, a steeper curve follows intuitively,” Ian Lyngen, BMO’s head of U.S. rates, said in a note on Wednesday.