In the last few months, the yield curve spread between 5Y Treasuries and 30Y has collapsed almost 80bps - this is the fastest relative drop since February 2007. The yield curve is down further today - at its flattest since September 2009. As BofAML's Macneil Curry warns, the flattenin trend is ongoing and sees medium-term targets down to 143bps (over 30bps below current levels) which would raise a number of eyebrows among the excuberant equity crowd (and the Spanish bond-buyers).
As BofAML notes,
Yesterday, we lowered our trailing stop on 5s30s to 182.3bps. Today, we recommend lowering it once again, to just above yesterday's high at 178.6bps. While the new 5yr has affected our chart in the near term, it does not alter the larger FLATTENING TREND. Initial downside targets are seen to 170.5bps/167.9bps (swing target and channel base), with medium-term targets seen to long-term retracement support at 143bps.
Back above 178.6bps would point to a bullish turn in the near-term trend.