POV, CARRY ON WAYWARD TSY CURVE,............>

US TSYS: POV, CARRY ON WAYWARD TSY CURVE, FLATTENING ONLY NATURAL. While the Tsy

curve continues to march flatter, it is unlikely that the move will continue to

the point of inversion -- typically viewed as a recession precursor. Even Fed

Harker thought it necessary to bring up last Fri reminding an inverted curve

does not cause a recession. Point of fact, the 2s10s yield curve has inverted 8

times over the past 60 years, while 2/3s of those times the move preceded a

(short-lived) recession within two years. 

- Flattening is a natural occurrence that can go on for years. The current 2s10s

curve at around 52.0 has room to go go lower, however, as the main driver in the

short end is the Fed's tighter policy agenda (3-4 quarter point hikes for 2018),

while the long end remains anchored by improving economic projections (Fri's

+148k NFP miss notwithstanding), focus on Fri's CPI the next pertinent

macro/inflation data point, while positive fiscal stimulus effect of late Dec

tax reform passage remains to be seen.

- Steepening on horizon? Possibly as some see foreign acct buying to shift

tonearer durations.