Michael Kao on November Fed Meeting, Treasury Refunding, & Bond Market Bear Steepening
Supply Shock
Addressing Bear Steepening in the Bond Market
In this chapter, they discuss the idea of thinking outside the box to address the bear steepening in the bond market. They propose that the Fed and treasury could have issued more duration and engineered a bear steepener to take the yield curve to three percent to six percent on the long end. This first principle solution would involve termed out debt at lower coupons.
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