How The Fed Destroyed The US Yield Curve (10Y-3M Slope Went From +227 Basis Points On May 6, 2022 To -118 Basis Points On July 26, 2024) Over 2 Years Of Downward Sloping Yield Curve

The Fed is the destroyer.

Up until 2022, the US Treasury yield curve behaved normally. In fact, as late as May 6th, 2022, the US Treasury 10Y-3M yield curve was at +227 basis points. Denote by the orange line in the following chart. That date corresponded with peak Fed balance sheet.

Then the massive spending by Biden/Harris/Congress hit the fan and inflation soared. The Fed counter attacked by raising rates and began scaling back their balance sheet. The 10Y-3M yield curve has been negative ever since.