US Yield Curve : Strong Steepening Trend

Nice visual of what's going on in the interest rates markets currently.

• Short end : ED spread on narrowing course ie bullish price action here.
• EDM0/EDZ0 heading towards +58. Topped at +85.
  
• Downside (EDZ0 outright) contained by friendly Fed expectations, especially after surprisingly weak -85k NFP last Friday.

• Long end : US10YY on upswing.
• Target above 4.00% easily.
• Yield downside supported by debt supply/deficits (TYHo upside limited).
  

• 2s/10s spread in strong uptrend. Expect it to go beyond +300.
• Stop loss below +266 (vs current +286).

So, if bullish buy short end; if bearish sell long end. USD/fx support will likely not come from higher US rate expectations, but more likely from troubles abroad eg PIGS.

[Addendum 11Jan10 9:00 pm : So in hindsight, it was sensible to hedge the long USD exposures by going long Gold, Oil, CAD etc]