The yield curve—measured here using the 10-Year US Treasury Note minus the 1-Year US Treasury Bill—has been steepening since reaching maximum inversion in June 2023, signaling healthier economic growth. Yield curve steepening occurs when long-term rates rise relative to short-term rates, driven by increases at the long end, cuts at the short end, or a mix of both.
Historically, changes in monthly sunspot activity lead the 10y-1y yield spread by roughly three years. While geopolitical shocks like the 1973–74 Arab Oil Embargo, the 2008 Global Financial Crisis, and the COVID-19 pandemic temporarily disrupt this correlation, the historical pattern consistently re-establishes itself once the crisis passes. For instance, the June 2023 yield curve inversion bottomed precisely three years after the 2020 sunspot minimum. Following the July 2024 peak in sunspot activity, this three-year lag projects a climax in yield curve steepening around July 2027. Beyond mid-2027, the pattern suggests the yield curve will begin flattening as short-term and long-term rates converge.► 3-Year Solar Lag: Solar activity cycles peak and bottom roughly 3 years before matching inflections appear in the 10y-1y US Treasury spread.
► Historical Baseline: The maximum yield curve inversion point recorded in June 2023 occurred exactly 3 years after the solar minimum in 2020.
► 2027 Steepening Peak: With Solar Cycle 25 having reached its maximum around July/August 2024, the 3-year lag model projects the current steepening phase to reach its climax around mid-2027.
► Post-2027 Outlook: Beyond the mid-2027 peak, the cyclical relationship points toward a renewed flattening phase as long-term and short-term yields begin converging back toward inversion.
See also: