The inversion intrigue: decoding the US yield curve's recent shift

Hope you are having a great Friday.

If you haven't noticed, the yield curve has been getting a lot of attention in the financial media.

Why?

In short, the long end of the yield curve is rising and rising fast. The technical term is a "bear steeping”. And this could have significant consequences for investors.

This is my latest data visualisation, published this morning. If you want to know how I made this, I used something called JavaScript D3, which works really well with this type of data visualisation.

I have plotted the yield curves progress intraday during this period and this is what I found. The bear steepening started almost one month ago. There was also a previous and very brief bear steepening event a few weeks prior, but that one quickly faded as soon as it started.

So, what is happening here?

Generally, a conventional yield curve slopes upwards, reflecting lower short-term rates in comparison to long-term ones, indicating that investors often prioritise quicker returns on shorter-term investments.

Firstly, that is not what we have here. The yield curve is inverted and it has been for some time now. What we are seeing now is that the long end of that yield curve is now rising, faster than the short end.

This has led to what experts term as a 'bear steepening'. So what are the implications of this event and what does it mean for investors.

Read on to find out.