Updated: Jun 17, 2020
10 Year vs. 30 Year Treasury Curve
The yield curve is unusually bifurcated, with short maturities held down due to an assumed slowdown in the near term outlook for global growth, low inflation, and heavy discounting of a “black swan event.” The longer maturities are pricing in higher future inflation created by expansionary monetary and fiscal policy late in the business cycle, which has caused increased US borrowing and global debt financing.
While the news headlines focus on the inversion of the yield curve in the short maturity space, we have highlighted the important inversion between 90 day LIBOR and 10 year Treasuries, currently about ~10bp.
However, it is noteworthy to see the recent steepening of the Treasury yield curve between 10 and 30 years to a near term high of ~40bp.
In an investment world of potentially abnormal valuations, this steepening represents a normalization of the future value of money. Should this trend persist, investing in bonds congruent with liabilities and multi-generational obligations will come back in vogue.