Mustafa Chowdhury on Mortgage Risks, Fed Shocks and Derivatives
Macro Hive Conversations With Bilal Hafeez
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Is the Fed Holding the Duration Risk?
At the beginning when interest rates were very low, households had a lot of interest rate risk because there was the possibility of rates going up. But because they refinanced over the course of the last year, they've got rid of that interest rate risk due to 30-year mortgages. So given that they have low duration in their household balance sheet, they can now take on duration. They can buy long term bonds in their portfolio and that may be keeping the yield curve more inverted than we have ever seen in effect.
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