Yield Curve Steepening

from Mish's Global Economic Analysis:
Bernanke cannot have his cake and eat it too. If the economy is recovering the yield curve should steepen. And steepen it has. The Yield Curve Is Steepest On Record.

The difference in yields between Treasury two and 10-year notes widened to a record on concern surging sales of U.S. debt will overwhelm the Federal Reserve’s efforts to keep borrowing costs low.

The so-called yield curve steepened to 2.75 percentage points, surpassing the previous record of 2.74 percentage points set on Aug. 13, 2003.

Ten-year notes have lost 10.3 percent this year, according to Merrill Lynch & Co. indexes, while 30-year bonds have lost 27.5 percent. Two-year notes have gained 0.2 percent...

If the economy is recovering, the Fed should welcome this steepening. However, what if the yield curve is simply reacting at the thought of Bernanke monetizing Obama's massive deficits and the various stimulus plans?

I doubt the economy is recovering but it is may be getting worse at a lesser rate. Moreover, if the curve flattens, it sure will not be because of intervention, it will be because the so-called recovery has stalled. Heaven help Bernanke if the economy worsens and the yield curve continues to steepen.

Regardless why the yield curve is steepening, Bernanke's belief that he can control both the long and short end of the curve is seriously misguided. The fact is he cannot really control either, at least for long.