The U.S. Treasury yield curve — especially the 5s30s segment — has become a critical battlefield for macro investors navigating an evolving economic landscape. Recently, the behavior of the curve has shifted from what many had initially interpreted as a classic “bull/twist steepener” — often associated with growth concerns — into more complex bear-led dynamics. In this post, we explore what’s driving these moves, how positioning is shifting across global regions, and where opportunities might lie from here.

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From Bullish Twists to Bearish Pressure

To start, it’s essential to understand the difference between the steepening regimes we’ve witnessed:

• Bull/Twist Steepeners: These are typically associated with falling front-end yields due to expectations of rate cuts, often tied to slowing growth or dovish policy shifts. In this regime, long-end yields may stay firm or fall less, creating a steepening of the curve.
• Bear Steepeners (and Flatteners): More recently, the narrative has pivoted. The curve has steepened, not from falling front-end rates, but from rising long-end yields — often in response to profit-taking and shifting expectations around inflation and policy normalization. This type of steepening is riskier and more sensitive to duration and supply dynamics.

The recent moves in the 5s30s have largely reflected the latter — a bear-driven steepening where long-term yields push higher faster than the belly of the curve. This has shaken out a number of tactical positions, cleared some froth in positioning, and reset the board for the next phase of curve trades.

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Global Flow Dynamics: Who’s Driving the Curve?

When analyzing curve moves, it’s critical to identify who is behind the flows. A time-zone analysis of returns reveals a fascinating evolution in the steepening trend:

• Asian Accounts: Early in the move, Asian investors were the primary drivers. Data suggests they were short the curve heading into the steepening, likely betting on a flattening trend. However, as the curve began to steepen, many of these positions were unwound, locking in profits and cleaning up their exposure.
• EMEA Hedge Funds: As Asian flows faded, EMEA-based hedge funds stepped in. These accounts have maintained a net short bias but have been more active in expressing steepener views — suggesting a shift from profit-taking into a more directional stance.
• North America (NAM): Interestingly, U.S.-based accounts have remained relatively flat. There’s been no strong directional conviction from this region, which could imply latent potential for a positioning build-up should sentiment shift.
• Asset Managers (AMs): Most recently, the bid has returned via asset managers. Their involvement, especially at these cheaper levels of the curve, indicates that the steepening trade may be getting structural legs — a longer-term view starting to replace short-term tactical plays.

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Positioning Reset: Clean Slate or Crowded Trade?

What does this all mean for current market positioning?

The consensus is that the steepener trade has become cleaner — many of the earlier speculative or crowded trades have been unwound. This doesn’t mean it’s contrarian, but it suggests that there’s less pressure from forced flows and stop-outs, creating a more balanced risk-reward setup.

Key technical markers are being watched closely:

• 85bps: Below this level, tactical steepener positions are under pressure.
• 65bps: This is the risk threshold for more structural steepeners — those positioned for longer-term normalization of the curve.
• 95bps and below: This is where many are now looking to add to steepener positions, considering the curve attractively valued at these levels.

The current curve dynamics — with steepening reasserting itself and positioning no longer overcrowded — offer a compelling tactical opportunity, particularly if volatility continues to favor relative value over outright directional bets.

As the macro backdrop continues to shift — with global growth, inflation trajectories, and central bank policy still uncertain — the UST curve will remain a critical signaling mechanism. The recent evolution from a bull/twist steepener to a bear-driven move tells a deeper story about investor behavior, regional flows, and risk positioning.

With the curve still relatively flat historically and positioning increasingly balanced, there’s a growing case for a further steepening bias, especially if long-end supply remains heavy or inflation proves sticky. For investors looking to express macro views through the rates market, the 5s30s remains a focal point — and current levels may offer a tactical entry with improving risk-reward dynamics