GAP TO NARROW

US YIELD CURVE ABOUT TO CHANGE SHAPE, FLATTEN

The US yield curve is going to flatten as long term rates fall towards short term rates as can be seen in the above chart. Here you see the 30 year TBond yield minus the 2 year TNote yield which gap currently stands at 2.62% or 262 basic points...should this gap narrow through the 260 points level it would allow the gap to continue to narrow to 224 points in the first instance with the next stop at +-175 points.