Why the Yield Curve Is Steepening but Not Predicting Recession

The yield curve is steepening again, but this time it's not signaling a recession. Lucas and Luna dig into the mechanics behind the move: the ten-year Treasury yield at 4.49 percent is up while the two-year yield at 3.62 percent is flat, pushing the spread positive after two years of inversion. They explain why this steepening is driven by term premium — investors demanding more compensation for holding long-term bonds amid higher inflation uncertainty and a growing federal deficit — not by expectations of a future rate cut. Using the latest Fed Funds rate of 3.63 percent and Friday's hotter-than-expected wholesale inflation print, they show how the bond market is pricing in stickier inflation rather than a slowing economy. The episode also touches on what this means for mortgage rates and corporate borrowing costs. Finally, Lucas and Luna briefly note that listener support via Buy Me a Coffee helps keep the show ad-free and independent. #YieldCurve #Steepening #TreasuryYields #TermPremium #FederalReserve #Inflation #BondMarket #RecessionSignal #TenYearYield #TwoYearYield #FedFundsRate #WholesaleInflation #PPI #EconomicOutlook #MacroEconomics #FexingoBusiness #BusinessPodcast #MacroTuesdays Keep every episode free: buymeacoffee.com/fexingo