Breaking News
Get 40% Off 0
👀 Reveal Warren Buffett's stock picks that are beating the S&P 500 by +174.3% Get 40% Off

Bulls Hold Ground Amid Yield Curve's Bear Steepening: What's Next?

By Michael KramerMarket OverviewNov 29, 2023 02:42AM ET
www.investing.com/analysis/bulls-hold-ground-amid-yield-curves-bear-steepening-whats-next-200643965
Bulls Hold Ground Amid Yield Curve's Bear Steepening: What's Next?
By Michael Kramer   |  Nov 29, 2023 02:42AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
US500
-0.17%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
DJI
-0.06%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
UNH
-2.91%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
DE2YT...
-0.65%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
US2YT=X
+0.04%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
US2US...
+-3.16%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

It was another pretty slow day on Tuesday, with most of the action in the bond market, with the 2-year falling by 15 bps, resulting in the yield curve steepening with the 10-2 Year Treasury Yield Spread rising by around eight bps to -42 bps.

It looks like the move lower in the 2-year started around 8 am, which was when the German preliminary CPI reading for November came in below estimates, falling by -0.1% m/m vs. last month’s flat reading, while year-over-year CPI rose by 3.5% versus October’s 3.8%. The harmonized CPI for Germany for November fell -0.5% versus -0.2% in October while coming in at 2.7% y/y from 3.0% y/y in October.

Germany 2-Yr Yield-Daily Chart
Germany 2-Yr Yield-Daily Chart

Those were some pretty big drops in inflation for Germany, and it sent the Germany 2-Year yield down seven bps on the day, which helped push the US 2-year down. The US 2-Year took another step down around 10:35 am ET when Chris Waller noted that the Fed could cut rates some next year if inflation rates in the US keep coming down.

This would seem like common sense, given that if inflation rates come down and the Fed Funds rate doesn’t go down, monetary policy would grow more restrictive, as real rates go higher. So, one would expect the Fed to cut as inflation comes down. Of course, the question is how much inflation comes down and how much the Fed cuts.

US 2-Yr Yield-5-Minute Chart
US 2-Yr Yield-5-Minute Chart

If the curve continues to steepen, S&P 500 is likely to sell off. The curve has been driving stocks for a while now, and while stocks did not sell off yesterday, a steepening yield curve will make it very hard for stocks to rally.

US10Y-US02Y-2-Hr Chart
US10Y-US02Y-2-Hr Chart

United Health Updates Earnings Outlook

Meanwhile, UnitedHealth (NYSE:UNH) updated its 2024 earnings outlook yesterday; the guidance may have come in a bit mixed, with adjusted earnings at the mid-point of $25.75 versus estimates of $27.83. Meanwhile, revenue guidance came in at $401.50 billion versus estimates for $394.97 billion.

Operating cash flow is expected to be $30.50 billion, less than analyst estimates of $31.5 billion. This stock is trading down about 50 bps after hours; it’s not a big deal. But this will be one to watch today, considering it has the largest weighting in the Dow Jones Industrial Average at 10%. The stock has been trading sideways and is now at the upper end of the range, so a move lower in UNH would probably indicate the Dow moves lower.

UNH-4-Hour Chart
UNH-4-Hour Chart

Original Post

Bulls Hold Ground Amid Yield Curve's Bear Steepening: What's Next?
 

Related Articles

Bulls Hold Ground Amid Yield Curve's Bear Steepening: What's Next?

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your investing.com profile, will be public on investing.com and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (2)
Grigor Shopov
Grigor Shopov Nov 29, 2023 5:42AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Do you mean this a bull steepening, with expectations for recessionary period next year?
ali jahanbin
ali jahanbin Nov 29, 2023 5:05AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Yes
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email