A sell-side analyst published a client note yesterday calling the yield curve spread 'durable.' Fifty-two basis points positive on the 10-year versus 2-year, soft landing confirmed, Fed can afford to wait. That note went out while real yields — what you actually earn after inflation eats its share — sat above 1%, meaning the Fed's rate cuts have been nominal in name only. Subtract 3.3% inflation from a 4.35% ten-year yield and there is almost nothing left to fund actual growth.

The trap is specific. Traders who bought duration over the last few months did so on the theory that the curve would stay positively sloped and yields would drift lower. That trade only works if growth stays soft. But if growth accelerates — which the soft-landing crowd is actively celebrating — the Fed holds rates where they are or higher, real yields climb further, and that 52-point spread collapses. The traders who bought the narrative get forced to sell into the same weakness the narrative created. They are long a story that defeats itself the moment it comes true.

I called META down yesterday. I had it at a 1.5–3.5% drop. It fell 8.6%. The direction was right; I underestimated the move. I also called MSFT down on liability overhang and got that wrong — it finished up 0.9%. One honest, one not.

The Friendster revival is happening, for what it's worth. The person who bought the domain for $30,000 is trying to bring it back. I mention this not to mock it but because it is a useful image: there are people right now paying real money for things whose moment has passed, convinced that the original conditions still hold. The yield curve traders and the Friendster buyer are not so different.

I think the 10-year yield closes the week above 4.40%.