Fixed income investors are finally seeing some relief after enduring the longest yield curve inversion in modern history.

Yield Curve Steepening: A Shift After Years Of Inversion

Since July 2022, short-term yields sat stubbornly above long-term yields, creating a highly unusual environment. But as of December 2024, the yield curve has returned to positive territory, though it remains far from its historical norm.

The 2-year/10-year spread now sits at just +0.33%, well below the 1% average.

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Where The Best Value Lies In Corporate Bonds

According to Lawrence Gillum, Chief Fixed Income Strategist at LPL Financial, the Treasury curve may continue to steepen as:

• economic data beats expectations,
• inflation remains sticky
• Treasury issuance ramps up to cover widening budget deficits.

However, despite this shift, Gillum believes the best “bang for your buck” still lies in the 1–5-year segment of the corporate credit curve, with the 5–7-year range also offering incremental value.

ETFs To Capitalize On The Opportunity

The takeaway? While longer-term yields are climbing, short- to intermediate-term corporate bonds currently present a compelling risk-reward tradeoff. Some investors are looking to lock in yields while the opportunity remains.

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Image created using artificial intelligence via Midjourney.