Post-November jobs report this morning, we are seeing some weird reaction in the bond market. Two-year yields have gone up more vs. the 10-year. As a result, the curve is flatter. In fact, as shown in the chart, the curve has been flattening throughout the year, even as the jobs picture has improved quite a bit. If the relationship between 10-2 spread and unemployment rate holds, then the curve needs to continue to flatten for continued improvement in the latter.
