Treasury Yield Ratio Looks Like A Breakout

It is not just the stock market that's enjoying an upside breakout. So are the yields on longer-end Treasuries. Today the yield curve further steepened, with yields on 3-month bill and 6-month bill going down and yields on 2-year, 5-year, 10-year, 30-year all going up.

One of the oft-mentioned indicator of the yield curve steepening is the spread between 2-year note yield and 10-year note yield. This is the chart that plots the ratio (=[10-year note yield]/[2-year note yield]). The higher the ratio, the wider the spread.

As you can see, it seems to be having its own breakout from either "cup and high handle" formation or "base on base" formation. Either way, it is a bullish formation for the ratio, not so bullish for the rest of the market, bond or equity.

Only 2 years ago, you can see on the chart that the ratio was barely 1, indicating the 10-year note yield was THE SAME OR LESS than the 2-year yield. (The yield curve was flat. See post.)

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