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The major banks are loving the uber-steep yield curve that allows them to borrow money on the cheap, and then lend it back to the government at a fat yield.
Well, that’s just about over. Bernanke has signalled the beginning of the rate-hike cycle (driving up the cost of short-term borrowing) and as this historical chart of the 2year-10-year yield spread (via Waverly Advisors) indicates, the curve just can’t get any steeper.
In fact if history is any guide, it’s about to collapse big time.
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