As the market prepares for rate cuts, bets are being placed on the yield curve steepening gradually.

The July 10th data from Golden Finance shows that as traders prepare for the Fed’s rate cut, the stock market is pumping. The Euro Stoxx 600 index, S&P 500 index futures, and Nasdaq 100 index futures are slightly higher, and derivative traders continue to predict two rate cuts in 2024. The two-year US Treasury yield is close to a 3-month low, prompting widespread bets that the US Treasury yield curve will normalize in a steeper direction. The idea behind this trade is that actual rate cuts will depress short-term bond yields, while concerns about fiscal spending will push up long-term bond yields. Pimco’s sovereign credit analyst Nicola Mai said: ‘We are ready for a steepening curve. Later this year or early next year, we should see a curve inversion.’