• Banks have been buying Treasuries since trade war worries flared up
  • Banks’ response to the upcoming shift in government borrowing will likely be a major determinant of whether the curve inverts in one year or three
  • When the curve inverts, the equity market typically has a correction. That correction may be larger than normal when the curve next inverts, as so many equity investors seem to be focused on it
  • That correction then typically ushers in two years of aggressive M&A activity at high valuations, as banks shift from the carry trade to making loans for deals

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