Debating the Impact of Treasury Supply

The podcast discusses the debate surrounding whether the supply of treasury securities significantly affects their prices and yields. Proponents of the idea argue that if the Federal Reserve buys a substantial amount of treasuries, it distorts market signals and renders the yield curve meaningless. This perspective suggests that an inverted yield curve, which typically signals an impending recession, is primarily a result of the Fed's actions rather than genuine market conditions. However, the argument raises questions about the impact of oversupply on interest rates and whether supply alone can explain the current state of the treasury market.