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The Compound and Friends cover image

The Credit Crunch Is Just Beginning

The Compound and Friends

NOTE

The Impact of an Inverted Yield Curve on Banks

The yield curve inversion negatively affects bank profitability when both short and long rates go up. As the long rate increases, the value of assets held by banks, such as treasury bonds, decreases. This was seen in March 2023 with Silicon Valley Bank experiencing a decline in assets and negative equity. Around 10% of banks faced a similar situation.

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