• Skip to primary navigation
  • Skip to content
  • Skip to footer
Daniels Trading

Trade Futures, Spreads and Options with Confidence.

Top Navigation

  • Open a Futures Account
  • Sign Up
  • Log in
  • 1.800.800.3840

Primary Navigation Menu

  • About
    • Who We Are
    • Services
    • Risk Disclosure
    • COVID-19
  • Trade
    • Broker-Assisted
    • Self-Directed / Online
    • Request Pricing
  • Hedge
    • Ag Marketing Plan
    • WASDE Analysis
    • Grain Resources
    • Livestock / Dairy Resources
    • Request Pricing
  • Invest
    • Automated Strategies
    • Managed Futures
    • Request Pricing
  • Advisories
    • GENERAL / FUNDAMENTAL
      • DT Newsletter
      • Insider Market Advisory
      • Turner’s Take Newsletter & Podcast
    • TECHNICAL ANALYSIS
      • The Cullen Outlook
      • Data Feed Trade
      • Jarboe Trading Journal
      • Trade Spotlight
    • AG MARKETING
      • Cattleman’s Advisory
      • Technical Ag Knowledge
      • Turner’s Take Ag Marketing
    • THIRD-PARTY RESOURCES
      • CFRN
      • Moore Research Center, Inc. (MRCI)
      • OptionWorks®
      • TASMarketProfile.com
  • Education
    • CME Group Resource Center
    • CME Group Offers
    • Small Exchange Resources
    • Guides
    • Frequently Asked Questions
    • Order Entry Handbook
  • Blog
    • Futures 101
    • Ag Marketing
    • Tips & Strategies
    • Trading Advisories
  • Resources
    • Trading Software
    • Quotes and Charts
    • Futures Calendars
    • Contract Specifications
    • Margin Requirements
    • Futures Calculator
  • Accounts
    • Apply
    • Access My Account
    • Funding
  • Contact
 

When Will the Steepening Stop?

March 3, 2021 by Frank Kaberna| Tips & Strategies

While “The Steepening” may sound like a Hollywood-produced thriller wherein an animated monster made of tea leaves terrorizes some unassuming small town, it’s in fact the increase in the spread between short-term and long-term interest rates.

This form of steepening, however, can be a beast in its own right: the gap between 2YR and 10YR US Treasury rates has gone from below 0.80% at the start of December to above 1.3% last week (its highest value since 2015).*

The Case for the 2YR

Most of the steepening seen in the yield curve has come from the fresh legs of the 10YR getting as far as 1.4% as the 2YR still sits near 0%. A case could be made for the 2YR finally waking up and taking part in some of the upside that the rest of the curve has witnessed in the last few months (Small 2YR Yield (S2Y) futures let traders directly access short-term rates).

The Heat is On (Small 2YR vs Small 10YR)

(Small 2YR vs Small 10YR)
Source: dxFeed Index Services (https://indexit.dxfeed.com)

The Case for the Flattener

Traders can also play the difference between 2YRs and 10YRs by way of the spread. This interest rate-neutral trade puts two parts of the yield curve together to speculate on their difference growing and contracting. Some flattening could be in order after this historic run of steepening.

The TUT Spread

 Flattener Steepener
+1 S2Y -1 S10Y -1 S2Y +1 S10Y

The everyday trader can choose to view this blockbuster event through the lens of bullish/bearish interest rate trades or steepening/flattening yield curve spreads.

Stocks are expensive. Traditional futures are complicated. The Smalls are a new kind of product that pairs the efficiency of futures with the clarity of stocks. Check out The Small Exchange now>>

*Treasury yields (https:/treasury.gov) and index values (https://indexit.dxfeed.com/) taken on 2/25/21
—

To learn more about how the Small Exchange is merging the efficiency of futures with the clarity of stocks, make sure to subscribe to their YouTube channel and follow them on Twitter so you never miss an update.

© 2021 Small Exchange, Inc. All rights reserved. Small Exchange, Inc. is a Designated Contract Market registered with the U.S. Commodity Futures Trading Commission. The information in this advertisement is current as of the date noted, is for informational purposes only, and does not contend to address the financial objectives, situation, or specific needs of any individual investor. Trading futures involves the risk of loss, including the possibility of loss greater than your initial investment.

Filed Under: Tips & Strategies

About Frank Kaberna

Frank Kaberna is the head content strategist at the Small Exchange. He produces everything from brochures to videos that inform on the Small Exchange’s products. After earning a mathematics degree from the University of Michigan, Frank traded interest rates at the Chicago Board of Trade. He then worked on the tastytrade Network as a content producer and on-air talent before landing at the Small Exchange.

Subscribe To The Blog

Footer

Site Navigation

  • Frequently Asked Questions
  • About Us
  • Customer Reviews
  • Contact Us
  • Futures Blog
  • Open a Futures Trading Account
  • Media Resources
  • Fund Your Account
  • Legal Notices

Contact Us

StoneX Financial Inc.
Daniels Trading Division
230 South LaSalle Suite 10-500
Chicago, IL 60604
+1.312.706.7600 Local / Int'l
+1.800.800.3840 Toll-Free
+1.312.706.7605 Fax

Connect with Us

Trustpilot
Risk Disclosure
  • Risk Disclosure
  • Privacy Policy
  • California Residents Privacy Notice
  • Terms of Use
  • Back to top
 

Loading Comments...
 

You must be logged in to post a comment.