The Yield Curve: Shredding the Slope

Published on
September 12th, 2019
34 minutes

The Yield Curve: Shredding the Slope

Investment Ideas ·
Featuring Mark Orsley

Published on: September 12th, 2019 • Duration: 34 minutes

In his Real Vision debut, Mark Orsley, head of macro strategy at Prism FP, explains why the increasingly crowded bet on a steepening yield curve trade might work over the short-term. He adds, however, that over long-term, the risk-reward of an investment based on interest rates' "convergence to zero" could make sense as well. Orsley puts his macro view in the context of what he sees as a dovish Fed pivot and deteriorating economic fundamentals in the U.S. Filmed on September 10, 2019 in New York.



  • BF
    Brad F.
    13 September 2019 @ 23:01
    Would be good to know how a retail trader can put on an ED steepener. I think these are professional products.
    • DH
      Daniel H.
      15 September 2019 @ 03:24
      What I heard was own something like SHY until fed funds goes to zero, and then move out to IEI, then IEF, and then TLT as the fed brings the whole curve to zero over the next decade. But I may be mistaken.
    • JQ
      JACK Q.
      15 September 2019 @ 10:46
      You can buy Eurodollars via interactive brokers. I have edh1 vs edu2 steepener on
    • JC
      John C.
      18 September 2019 @ 09:33
      I would imagine you could just buy $SHY or Eurodollar longer-dated calls and combine that with a $TLT short put steepener trade.
    • RW
      Ryan W.
      21 October 2019 @ 02:48
      All these guys are smarter than me, but lazy guy I am, i'm turning this into 40% SPXL, 15% GLD, 15% TLT, 10% IEF, 5% SHY, 15% cash with periodic, or episodic, rebalancing.
  • JC
    John C.
    18 September 2019 @ 09:35
    Great interview. After the recent bond selloff seems like it might be a very good time to get back into Eurodollar futures after this Fed meeting today. Trade is now to zero on the short end but June- Dec 2020 99 Eurodollar calls got a lot cheaper these past couple of weeks. LIBOR goes away in 2021 wondering what implications that has on the Eurodollar market and how it will impact the longer-dated trade.
  • EK
    Edward K.
    15 September 2019 @ 14:59
    Good technical discussion. I am sure most retail investors like myself are pretty much unfamiliar with this key aspect of investment let alone macro. Hard to find this kind of content anywhere else. One note - Orsley made an interesting obiter dictu comment about young people migrating to the coasts. Would make an interesting demographic topic if generation Z migrates outward.
    • JC
      John C.
      18 September 2019 @ 09:31
      I'm Gen-X and already left the US...think we will see more and more of this as it pushes further into marxism/socialism, the economy wobbles, pensions start blowing up and things regress
  • RH
    Robert H.
    15 September 2019 @ 11:44
    Top shelf interview as Mr. Harrison guided it perfectly with Mr. Orsley connecting the dots. But I don't see interest rates dropping long term, short term yes. Consider capital flows away from EM, a run to safe-haven currencies (JPY/USD, CNY/USD, BTC/USD), run to gold & international treasuries (BWX) since April, etc. Corporate, government debt issuance up. This tells me some are waking up to the fact that QE failed cuz growth is slowing. China can lower their standards all they want, if smart investors can't make a buck, they sit, regardless of interest rates. China trade to U.S. is what, 3% GDP? Staring down the wrong pipe. ECB QE shit the bed! Now we see more central banks lowering rates? That sends the wrong message. Grandma ain't taking any extra trips on these rates already so there goes that chunk of an economy. Never has lower interest rates stopped a recession, monetary crisis, or debt crisis. The global economy is slowing FFS! I don't care how low interest rates go, you don't invest in an aging race horse. Giving your kid $60 grand for college only delays you from buying that new car and still your kid still can't afford a house. So as liquidity dries up, globally, then they (government & corporate) will all have to compete for yield to suck them in. Obviously Powell can't raise rates now, then the USD & debt skyrocket. But when competition for debt heats up, both sides need to up the offer. I have a better chance of wine & cheese values rising as they age.
  • GG
    Gary G.
    14 September 2019 @ 23:51
    Great interview!!
  • LC
    Lindsay C.
    14 September 2019 @ 01:14
    What an incredibly insightful and thought-provoking interview, packing a lot of strong and technical content in 34 minutes. Great discussion and would love to hear more of Mark Orsley's views, so certainly bring him back!
  • PP
    Peter P.
    13 September 2019 @ 20:10
    This was a great interview, even though I don't necessarily agree with his conclusions. Everyone and their dog thinks inflation is dead and will never come back. Therefore, it is likely to come back. Demograph trends can be influenced through immigration policy, so that is no lock either.
  • JQ
    JACK Q.
    13 September 2019 @ 14:16
    I really missed the days when Marc Orsley and Charlie McElligott were both @ RBC publishing their weekly macro views. Was pure gold!
  • DS
    David S.
    13 September 2019 @ 06:28
    The US unemployment rate is the lowest in 50 years. The numbers hired should be lower as the pool of willing workers is depleted monthly. DLS
  • KR
    Kartik R.
    13 September 2019 @ 00:56
    Excellent interview. So when he says buy long-duration treasuries, why would/should one not buy intermediate-duration treasuries?
    • KR
      Kartik R.
      13 September 2019 @ 02:49
      Real inflation could kick in, say, 5-6 years after QE is supposedly reintroduced sometime next year. Wouldn't an intermediate (10 yr) treasury not suffice in that situation? Why take the long trade when one can assume there could be some inflationary pressure after excessive QE?
  • MA
    Muhammad A.
    13 September 2019 @ 00:32
    Exceptional! Great content.
  • RA
    Robert A.
    12 September 2019 @ 22:14
    Another great Guest and another great job by Ed. Very focused pithy and concise presentation on a relevant topic. This is the essence of why I have been with RV almost since inception and why I continue to allocate my time to RV. Would love to have this Gentleman back on in 6-12 months.
  • GC
    George C.
    12 September 2019 @ 19:21
    Started slow, I thought, but he hit his stride and it made for a great interview.
  • sr
    stephen r.
    12 September 2019 @ 18:19
    Great interview. Informative, clear and concise
  • rr
    rlw r.
    12 September 2019 @ 17:40
    Well done as always Ed, yes please have Mark back. You guys provided an excellent chat.
  • RM
    Ryan M.
    12 September 2019 @ 16:28
    Damn this was really informative and educational! Love it!
  • WS
    William S.
    12 September 2019 @ 16:26
    Very knowledgeable. Bring him back.
  • MC
    Marc C.
    12 September 2019 @ 15:56
    Agree with view on demographics and rates discussed in last 3 minutes. May be starting to see effects of this now.
  • GP
    Geoff P.
    12 September 2019 @ 15:03
    I assume you’re playing the steepeners via ED spreads, correct?