New Fed policy will allow inflation to run above its 2% target. To achieve higher inflation the Fed is is expected to hold short-term rates very low for a long time.
A sudden steepening of the yield curve after an inversion almost always coincides with recession.
Aggressive expansion of the money supply through fiscal and Fed policy has led to concerns of rising inflation. The US government needs to fund relief packages and pump money into a weak economy. Excess supply of longer-dated Treasury supply hitting the market may put additional pressure on prices and keep long dated yields moving higher. Institutions may aim to unload expensive long-term Treasuries onto the market which could depress prices and increase yields.
Investors may soon demand higher yields on longer-term debt. But are we ready for higher back-end rates & a steeper curve?
The inflation break-even rate between 10 year Treasury Inflation Protected Securities (TIPS) and regular 10 year Treasuries hit 1.8% last month, the highest since February.
A sudden steepening of the yield curve after an inversion almost always coincides with recession.
Aggressive expansion of the money supply through fiscal and Fed policy has led to concerns of rising inflation. The US government needs to fund relief packages and pump money into a weak economy. Excess supply of longer-dated Treasury supply hitting the market may put additional pressure on prices and keep long dated yields moving higher. Institutions may aim to unload expensive long-term Treasuries onto the market which could depress prices and increase yields.
Investors may soon demand higher yields on longer-term debt. But are we ready for higher back-end rates & a steeper curve?
The inflation break-even rate between 10 year Treasury Inflation Protected Securities (TIPS) and regular 10 year Treasuries hit 1.8% last month, the highest since February.