There is a rare and powerful trend occurring in bond markets. History shows that if left unchecked, it can cause serious damage to equity markets and the economy. Over the last 3 months, US bond markets are in an aggressive and prolonged period of bear steepening of the yield curve. Bear steepening happens when interest rates move higher but it’s long-dated yields that take the lead, hence shifting the entire curve higher but also steeper. {chart} The chart above shows the 10-year market-implied path ahead for Fed Funds before and after bear steepening and the net change in the box below. To understand it, think of ... (full story)