Mackenzie: steep yield curve

After the Fed reiterated on Wednesday that it would keep its overnight rate low for an extended period, the gap between two and 10-year Treasury yields briefly rose to 276 basis points.

That eclipsed the previous record of 274bp set in August 2003 and the 268bp in July 1992. Steep yield curves in 1992 and 2003 were long-term "buy" signals for equity investors.

"In both of those periods the yield curve accurately signalled future economic expansion and, coincidentally, a great time to buy US equities," said Nicholas Colas, chief market strategist at BNYConvergEx.

This time, however, Mr Colas thinks the outcome may be different, as weak banks, high (and rising) structural unemployment and the moribund housing market "act as natural limiters on how fast this power plant will move the US economy".