Morning Notes — Focus on Curve Steepening

Overnight vaccine headlines may not read universally positive, but bond yields are higher and the curve is steeper post-release.  Ten-year Treasury bond prices have successfully completed their 2 week-long counter trend rally with yields bouncing off support at ~0.98% on Wednesday (now 1.077%). The shape of the yield curve remained largely unchanged during the last two weeks, adding conviction to our pro-cyclical/value equity bias.  The PFE/BNTX vaccine data from November 9, drove the 5-year/30-year Treasury yield spread just above 130bps with coincident outperformance from the S&P 500 Value Index (SVX). Today, the 5-year/30-year spread sits at ~141bps and we’re using the pullback to add cyclical/value equity exposure at oversold levels.