And yet it moves

Even though it seems the US yield curve is static and does not move considering the economic context (deficit, inflation, shutdown, etc), the reality is that it is indeed quietly moving. In the chart below you can see 6 buckets of the curve, organized by term, where you can see the movement on each one since the Fed started cutting rates in September 17th, 2024. The curve is steepening, not much yet, as it’s probably waiting to see what happens to the tug of war on inflation between tariffs and AI and what happens to unemployment in the context of sticky inflation. One would think that with an agressive fiscal agenda like the one Trump is imposing, the long end of the curve would be much higher, but there are disinflationary forces and a lot of uncertainty (for instance who the new President of the Fed will be) that seems to paralyze investors when it comes to making big bets. At least for the moment. But in the words of the Galileo “And yet it moves” .

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Chart source: Bespoke investments.