As a result, when interest rates bottom during the recovery phase of the business cycle, the spread between the 30-year bond and the 10-year note tends to reach its cyclical peak. Then, as monetary policy moves from maximum accommodation to “normalized” rates, the 10-year yield tends to rise more than the 30-year yield, compressing the spread. Finally, in the last stage of a monetary policy tightening cycle and yield-curve inversion, the 10-year yield can actually rise above the 30-year yield, as seen in the late 1980s, late 1990s, and 2006.
