- 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
Sign up to access the rest of this content!
This content is not available to free users. Sign up for a paid account to access the rest of this content.