The collapse of this relationship in 2016 is a graphic representation of the poor data and negative rate gloaming. In "normal" times - remember normalization? - the spread would move out toward 150 bps with the Fed around. Instead, the year long jawboning to 1st hike produced a short blip....then collapse.
The sister relationship in Euribor is an "above par" handle -3.5 !! The bear flattening on the T curve has facilitated the recent pop back to life. The sketchiest type of improvement. (as 2yr to 5yr T sector leads market down the Red and Green Euros widen to the front). We prefer to trade the 2nd year spread, with March already upon us, we will be switching to Sep16-Sep17 promptly. The wider the better. Contango? This will go down as the shortest tightening cycle ever.