The USD curve has bear steepened for a few days in a row, and while it may be tempting to connect this to Biden’s poor performance in last week’s debate and the subsequent higher likelihood of a Trump presidency, we believe there are also connections to the business cycle.

We are seeing early signs of freight and oil spilling over into the yield curve action, which might explain the bear steepening beyond the relatively weak attempts to attribute it solely to Trump’s debate victory against Biden.

The oil market has been on a bull run since early June, and positioning remains light. This indicates there is room for further upward movement, as the robust driving and travel season (up 6-7% compared to a year ago) maintains healthy demand for transportation fuel.

Chart 1: The necessity impulse peaks around these weeks for the yield curve