ECON430-Topic #2: Today’s Yield Curve Doesn’t Yield Much… (for now)

The yield curve represents the interest rate on varying maturities of debt for one particular type of risk. For example, the U.S. Treasury yield curve indicates the cost for the U.S. government to borrow money for short periods (like 1 month) out to longer periods (like 10, 20, or 30 years). A flat yield curve, would be one where the cost to borrow at these various terms is the same, while a “normal” yield curve is one where longer-term borrowing pays a significantly higher rate for longer terms.

The yield curve is also known by an alternative version called the term spread, which might compare the ten-year interest rate with the one-month interest rate for one risk level (e.g., the U.S. government). This is very different than the credit spread, which compares a risky and a safe asset that have the same maturity (e.g., the TED spread which is 3m T-bill minus 3m overnight rate). All of this is typically measured in “bips” or basis points which represent 1/100th of a percent. Thus, 100bps = 1%.

OK, on to the topic… Right now, the yield curve is getting progressively steeper (i.e., the term spread is widening). Currently, the two-and-ten year term spread is at 118 bps (see below). Some people read this as the potential for a booming economy on the horizon. It could also be indicative of future rising inflation (Treasury Yields Stabilize After Big Jump – WSJ – paywalled but WSJ). This is somewhat in contrast to other indicators like the Conference Board’s Leading Economic Indicators (LEI) index, which has been declining for several months (Bubble Markets Display Bizarre Behavior Right Before They Tumble ( So, what appears to be on the horizon here? Good times with potential for inflation? Or is the market just reacting to a “risk-on” environment where investors are pivoting out of safety and into equities? Finally, what does this say about the Fed’s ability to keep rates low for the forseeable future?

So why has the Fed pledged to keep interest rates low for the forseeable future? While things might be looking up in the future, they haven’t been looking all that good of late (Fed stresses its commitment to low rates as economy stumbles ( The Fed cut rates in 2020 in an effort to shore up a weak pandemic-impacted economy. In response, people went out and borrowed money to purchase assets like homes (Household debt rises to $14.6 trillion due to record-breaking rise in mortgage loans ( Where might the Fed go from here? If long-term rates rise, and mortgage rates rise, what might happen down the road to those people who borrowed lots of money in 2020 and 2021? It might not seem like a big deal to those people who are just shopping to move from one home to another, but builders might be faced with unsellable homes that they hoped to sell on the heels of the hot 2020 market (Lumber prices top $1,000 as single-family housing starts drop 12% (

Looking back at 2019, there was another event that occurred which led many people to believe that there would be a recession in 2020. In October 2019, the yield curve inverted, meaning that short-term lending rates exceeded long-term rates. This has often predicted recessions, and it’s worth noting that every recession since at least the 1980s has been preceeded by a yield curve inversion. Now… no one could have predicted the COVID-19 pandemic, but this is some evidence that the disease struck our economy at just about the worst possible time of preparedness. A yield curve inversion plays into our understanding of expectations of future interest rates to a degree, but is likely more indicative of a rush towards liquidity. As banks and other institutions seek to become more liquid, they might push to have a shorter term on lending, driving those borrowing costs higher, while leaving the long-rate pretty much unchanged.

Questions you might answer:

  • Does it seem as though the yield curve steepening of 2021 is predicting a booming economy? Or is this more indicative of inflation? Do you have any other evidence that could broadly supporty your beliefs?
  • Did the inversion of late 2019 accurately predict the economy was poorly positioned for a shock of any kind — let alone a large shock. In spite of the fact that the unemployment rate was at historic lows in late 2019, there were signs everywhere that the economy was not all that healthy. What other evidence to you have to support your opinions?
  • What would rising rates mean for the housing sector and investment? Is there a problem on the horizon for unsold homes or projects? Or is a rise of 100bps something most companies can sustain? What happens if credit spreads suddenly spike? Provide some evidence to support your opinion here.
  • You are free to discuss peripheral work to this topic as well, as long as you incorporate discussions of the yield curve, term spread, or even credit spread into your writeup.

16 thoughts on “ECON430-Topic #2: Today’s Yield Curve Doesn’t Yield Much… (for now)”

  1. While no one could have envisioned a global pandemic, the yield curve inversion did accurately foresee that the economy was in poor shape. Yield curve inversions have predicted the last 11 out of 11 recessions, and with a four and a half month inversion, it’s difficult to see a positive outcome (1).

    In late 2019 and early 2020, total corporate debt exceeded $10 trillion, which accounted for almost one half of the United States annual output. This large buildup in debt occurred because of an increase in borrowing from the lowest-quality investment grade firms and a trillion dollars spent on leveraged loans (2). Borrowing from firms with poor credit ratings has proven to hurt the economy, and Federal Reserve Bank Watchdogs were critical of these decisions.

    In addition, the US economy had been facing almost 10 years of consistent economic expansion after the Great Recession. The Fed’s raising of interest rates, starting in 2015, took a turn for the worse in 2018, when residential investment contracted in each quarter, which hadn’t happened since 2009. If the Fed hadn’t faced a pandemic, it’s likely that this decline of residential investment would have caused a major slowdown in economic growth (3).
    Although we will never know how the economy would have performed without a pandemic, the signs show us the United States economy was not as healthy as the news portrayed.


  2. The Fed decreasing interest rates in response to the Covid pandemic is leading individuals down a troublesome path. As mentioned, the decrease in interest rates has led to more people borrowing money and consuming. In particular, individuals have been purchasing homes to escape the effects of the pandemic and get out of their apartments. Despite the increase in demand for houses, homeowners were reluctant to put their homes up for sale as they were unsure about the market during the pandemic (1). As a result, home prices increased due to bidding wars. The increase in home prices results in individuals needing to borrow more money to cover the costs. With low interest rates, people are more willing to borrow this money. However, if the interest rates rise these people will be left to pay back a greater quantity of money than previously anticipated. This can lead to foreclosures on homes and individuals struggling to cover their rising mortgage payments.

    Similarly, the builders of these homes would also be harmed by a rise in interest rates. With easier access to money, these builders are able to construct homes for a lower cost. However, their repayment depends largely on the house selling. Rising interest rates and mortgage loans would lead to people being less willing to purchase these homes. Currently, 14% of people who purchased a home in April or later said the process was delayed due to Covid (2). With these delays, rising rates and increased material prices, builders can be left with no buyer for their home for an extended period of time. The builder would still have to pay off the borrowed money but without a buyer this process becomes more complicated.

    Companies should be worried about a rise in interest rates as the money they loaned out would be harder for individuals to repay. Individuals would find it harder to purchase homes making it more difficult for builders to sell the homes they have already built. This could lead to less houses being built in the coming years as builders are unable to cover their preexisting liabilities and rising material costs.


  3. Even pre-COVID economist were worrying about the possibility of a recession happening in 2020. The inversion started on May 23rd, 2019 and ended on October 10th, 2019. As 2020 started Kobe and his daughter died, I knew that 2020 was going to suck. Along with the passing of one an NBA great there was more evidence that there was a chance of a recession happening. Such as negative interest rates there was an estimated $11 trillion in various debt that had negative interest rates with the majority of it being held by European countries and Japan. Even with unemployment rate at 3.5%, which is the lowest its been since 1969, and ending 2019 wit economic growth that exceeded 2% the US and the entire world was not ready for what was to come in 2020. When the COVID pandemic hit us in early March. The unemployment rate hit its peak of 14.7% in April, it remained above 6.5% for the rest of the year.,unemployment%20in%20the%20United%20States.

  4. When the yield curve inverts, it has accurately predicted a recession 11 times. The yield curve inversion represents the U.S. Treasury short term rate is higher than the U.S. Treasury long term rate. Typically, the long-term Treasury provides a higher rate to compensate for the longer maturity of the treasury. A yield curve inversion is an indication of risk in the bond market (1). Interest rates can affect a lot of the decisions people make, especially when it comes to borrowing. If interest rates are low, the cost of borrowing is low, and people are more likely to make the decision to borrow. Inversely, if interest rates are high, the cost of borrowing is high, and this will deter people from borrowing. The housing market is great at showing how different interest rates will affect the decisions of homeowners. The concept of interest rates and their effect on people’s likeliness to borrow money applies to loans like mortgages. When interest rates are high, people are less likely to take out a mortgage than when the rates are lower (2). When mortgage rates are lower, making purchasing a home more affordable, a rise in the sale of homes can be observed. Developers are also able to borrow money at a lower, making it cheaper to finance construction leading to more houses being built. As rates rise, this process becomes more expensive for both the home buyers and the developers. The rising rates make all of this becomes less attractive, leading to an excess supply of houses for the shrinking demand.


  5. As of February 17, the 10-year US Treasury bond yield was 1.297%. This continues the trend of improving yields and came just after the release of highly improved January retail sales data. The January sales boost was spurred on by the recent stimulus checks. This data has led the Federal Reserve Bank of Atlanta to project economic growth of 9.5% up from the previous weeks projection of 4.5%. As of February 3, the yield on 2-year US Treasury bonds is .11%. This coincides with the federal funds rate being effectively zero. Low interest rates causes investment to increase and subsequently output to increase as well. Economist Robert Barone agrees that 2020 quarter 4 growth was improved by the lowered federal funds rate. However, as he points out the Leading Economic Indicators (LEI) declined in every quarter of 2020. The LEI is comprised of ten economic indicators ranging from average weekly initial claims of unemployment insurance to new building permits and new private housing units to average consumer expectations for business conditions. If this economic recession were caused by a normal shock these indicators could provide a pretty accurate picture. However, the current recession is caused by a global pandemic and economic lockdown. Instead of using unemployment rate it only uses new cases of unemployment, which makes things seem worse than they are. Despite new cases of initial unemployment insurance the unemployment rate has steady been declining since April. The pandemic has also, understandably, made consumers pessimistic about the economy. Output and inflation are positively related so with the low interest rates causing increased output, inflation could be on the rise as well.

  6. Previous yield curve inversions have predicted recession every time they have occurred in the past. While the yield curve did not predict the COVID-19 pandemic, it did show that there was likely a recession bound to occur in the next couple of years. What is the yield curve? The yield curve is simply an explanation of how when you are lent money for a longer period, the lender is expected to receive a higher interest rate to compensate for giving you access to money for a longer period, interest rates should be in an upward sloping motion as the length of the maturities increases, in the long term. An inverted yield curve shows that the interest in the short term is higher than that of longer maturities. (1) As the end of 2019 approached and 2020 began, economic activity began to rise and the chances of a recession began to decrease as seen in some of the indicators. However, shortly after this, the United States was plagued with COVID-19 and we saw the beginning of a Shapiros decrease in economic performance. In reality, the yield curve did not indicate that a recession caused by the coronavirus would occur but it was an indication that poor economic performance was ahead of us. The occurrence of the poor economic performance from COVID-19 was a coincidence and an acceleration of what was about to occur. (2)


  7. The current steepening yield curve seems to be indicative of a booming economy after the economic turmoil of the COVID-19 pandemic. The increasing yield curve shows that investors are more confident in the future and long-term securities will have a larger payoff than short-term securities (1). The 30-year treasury constant maturity has recovered to where it was pre-pandemic, with the rate being 2.11% February 6th, 2020 to 2.24% as of February 24th, 2021. Although the rate has been declining ever since its peak of 14.78% in August 1981 (2). A good indicator of short-term securities is the 10-year constant treasury maturity minus the 2-year constant treasury maturity. When the long-term yield curve is at a lower rate than the short-term yield curve, it is usually indicative of a recession and when the long-term rate is higher, it is a sign of a strengthening economy (1). As of February 25th, 2021, the 10-year minus 2-year constant maturity rate is 1.37%. Compared to the pre-pandemic rate of 0.27% at the end of January 2020, this is a huge increase but is still lower than the long-term rate of 2.24%, indicating a strengthening economy (3).

    This increase could also be due to inflation. As of February 25th, 2021, the current inflation rate is 2.14%, which is higher than it was pre-pandemic at 1.64% on February 4th, 2020 (4). The trends are correlated but it is likely that the increasing long-term yield rate is due to the rebounding economy, several other economic indicators are pointing towards increased growth. Real GDP has also exceeded its pre-pandemic mark of roughly $18.4 trillion and was sitting at close to $18.8 trillion last recorded quarter (5). If this change were solely due to inflation, real GDP would be below $18.4 trillion. Due to the increase in real GDP from where it was before the pandemic, it seems that the increase in the long term yield rate may be partially due to the inflation from fiscal policies, but is more likely an effect of the growing economy.






  8. With this increase in the yield curve, it seems that there is a prediction of a booming economy rather than inflation.
    A report a couple years ago by the St Louis Federal Reserve Bank outlined the present lack of significant inflation in prices (based on the Central Bank’s own target) . (1) Even in this current pandemic environment, inflation has been relatively marginal, with the most significant increases in things like food and healthcare costs increasing the most. (2,3) That reflects more the necessary costs to comply with pandemic regulations and ensuring safety rather than any general upward pressure on prices.
    What this increase in the yield curve does seem to portend is a booming economy. It was already seen throughout 2020 where whenever some significant good news against the Coronavirus fight came out, Wall Street stocks shot up. (4) Although there are definitely issues with using the stock market to measure the health of an economy, it still gives a good indication of investor sentiment overall.
    The good news continues as the worst of the winter surge is slowly starting to abate. (5) Additionally, vaccines are becoming more readily available than ever, with health care officials largely confident in the deliverance of President Biden’s 100 Million doses in 100 days promise. (6) That news makes it more likely than ever that the US will get back to some sense of normalcy by late-summer of 2021.
    That sense of normalcy means things like most people shopping, visiting family and friends, traveling, eating out at restaurants, limited traveling, etc., all of which have significant economic impacts
    So while those who say the the yield curve is indicating inflation, they are right in a sense. Just that, theres a booming economy on the horizon along with it due to positive vaccine and caseload news.

    [Why Is Inflation So Low? | St. Louis Fed](
    2. [12-month percentage change, Consumer Price Index, selected categories](
    3. [BLS CPI data for all Urban Consumers](
    4. [Vaccine news unleashes new momentum in stock market as hunkered-down investors flee cash](
    5. [The Pandemic’s Deadly Winter Surge Is Rapidly Easing – The Atlantic](
    6. [Fauci says 100 million vaccinations in 100 days ‘absolutely a doable thing’ | Reuters](

  9. The Covid-19 Pandemic brought an unprecedented shock to the U.S. economy. The U.S. economy was not prepared for any kind of shock, especially one of this nature or the length of the shock that the pandemic has brought. The pandemic quickly ended a long period of economic expansion as the U.S. economy had taken on a lot of debt (2). The inverted yield curve can be attributed to a loss of confidence in the U.S. economy, as investors switch their money from stocks to bonds (1). The lack of confidence that leads to an inverted yield curve easily explains why it is a good predictor for a recession (1).

    All of the consumer, business and government debt combined adds up to $64 trillion. The era of economic expansion and low interest rates fueled this taking on of debt (2). Business debt also increased in the years leading up to the pandemic, this could be an explanation of why companies have slowed spending used for growth and slowed hiring so drastically over the course of the pandemic (2). The inverted yield curve have offset optimism for 2021 that growth and inflation would increase (3). The economy was doing mediocre as the Fed kept hiking up interest rates and keeping inflation constant as an attempt towards economic expansion. However, the rising debt taken on my companies and consumers put the icing on the cake for the unpreparedness of the economy to have a negative shock.


  10. A downward sloping yield curve and ultimately inverted yield curves have been an accurate predictor to every single recession we have had since 1980. Although returns on treasuries could not have predicted a pandemic, the COVID-19 pandemic struck at a very vulnerable time. Yield curves went inverted in August 2019 and the difference between the two treasuries remained low as the pandemic hit the U.S. head on in the beginning of 2020. As of recent, the difference of the yields between the two have been growing and can be seen by a positively sloped yield curve. Naturally, we would think that observing yield curves that show an increasing slope would mean that we are entering into a booming period of our economy, but this might not necessarily be true. If we look at what drives interest rates for treasury bills in the first place, we can get better insight as to why we see fluctuations between the two types.
    Inflation Is the main driving factor that causes the two interest rates to differ. It is typical to see a higher interest rate for the 10-year treasuries compared to 2-year treasuries, because of the greater risk for inflation over a longer maturity period. If we were to see the gap between the two treasuries grow, then it would likely mean that there is greater expected inflation in the future with is which is typical to see with a booming economy.
    Unfortunately, our economy is not booming. What we’re likely seeing is the is anticipation of inflation that is going to come with the multitrillion dollar stimulus packages. The stimulus packages are doing their job and the federal funds rate is remaining low to get our economy back on track but the yield curve evidence of our economy booming is likely in reality to just be signs of higher inflation in the future.,to%20tamp%20down%20higher%20inflation.

  11. The steepening of the yield curve is indicative of an economic resurgence following the pandemic. As vaccines are in the early stages of being distributed, along with a 5.3%(1) increase in consumption in January alone, the United States is likely on track to overcome the pandemic soon. With high economic expectations in sight comes expected inflation which shouldn’t shock many. The last time the U.S. hit an inflation rate above 2% was in 2018 at 2.44%. The ten-year breakeven rate is a proxy for market participant’s inflation exceptions for the following decade ahead. The current ten-year breakeven rate of 2.14%(2) should act as an indicator to investors that inflation at or above 2% will soon be the new normal again. The increase in yield rates can create a pivot in the bond market and may induce a selloff of long-term treasuries, but investors should be able to absorb these higher rates with the strong earnings many businesses are starting to report.



  12. A steepening curve typically indicates more robust economic activity and rising inflation expectations. Thus, higher interest rates as investors bet that the central bank will likely raise rates to accommodate inflation. I believe this results from investors’ belief that the vaccine rollout will be successful in conjunction with aggressive fiscal stimulus.
    One of the most significant indicators for the future success of the economy will be based upon the vaccine rollout’s success. Though there has been some chaos between the federal and state governments, the white house expects to have enough of a supply to vaccinate 300 million Americans by July. But if the pace stays the same, we will not have enough vaccines for the population until September1.
    But, let’s say conservatively that the majority of the population can get vaccinated by the end of the year. If that is the case, then there should be much pent up demand in the economy. I expect once covid restrictions are lifting, the tourism and leisure industries will see a boom. Additionally, the surge in demand may be intensified by American saving at a higher rate than ever before as consumers had fewer options to spend their money2. But once restrictions are lifted, the economy may see waves of consumers, flush with cash, looking for ways to make up for lost time and spend their money.
    Another reason I expect the economy to garner strength is the democrat-controlled legislature. The federal government has already issued fiscal stimulus to the tune of $3.5 trillion, an unprecedented amount. Additionally, the Biden administration has pledged to employ a $2 trillion infrastructure plan to modernize our transit, auto industry, buildings, and power sector3. This infrastructure plan, along with the other fiscal measures congress is likely to take will strengthen the economy for the coming years.

    1. Weise, E. (2021, February 19). ‘Somewhere in there, the vaccine Got overpromised’: How the COVID-19 vaccination process turned chaotic and confusing. Retrieved February 24, 2021, from
    2. Fitzgerald. (2020, May 29). U.S. savings rate hits record 33% As Coronavirus causes Americans to Stockpile CASH, curb spending. Retrieved February 26, 2021, from
    3. The biden plan to build a modern, sustainable infrastructure and an equitable clean energy future. (2020, August 05). Retrieved February 26, 2021, from

  13. In retrospect, it seems obvious the economy was headed for a downturn in 2019. While the pandemic obviously isn’t something that reasonably could have been anticipated, it was really just the spark that ignited the tinderbox of other issues in the economy at the time. Besides the obvious warning of the yield curve’s inversion, corporate profit projections fell dramatically over the year. In December of 2018, it was projected that over the next year corporate profits would grow by 7.6%. By August of 2019 that had fallen to 2.3% (1). Gold prices shot up by more than 20% in under 4 months from May to August, and overall GDP growth was starting to slow down (1).

    Despite all these signs, people still felt completely blindsided by the economic collapse and blamed it all on COVID. The great performance of the stock market and low unemployment numbers were sufficient for most people to believe that the economy was in a great place, despite all these underlying issues. Even before the pandemic became an issue, economists believed the American economy was going to slow down, due to increasingly restrictive trade policy cutting off the gains from the previous tax cuts (2). While the scale of the recession was greater than most would have expected, the fact is that while the pandemic would have been a huge blow to the economy in any circumstance, the fact it broke out when the economy was showing signs of weakness was largely responsible for the scale of the recession.



  14. Recently, 10-year treasury yields have spiked to their highest levels in the past year (1). While steepening of the yield curve is typically indictive of economic growth, many investors are fearful of potential inflation. Over the course of the recession, the Fed. has engaged in aggressive monetary policy to increase the money supply by printing massive sums of money. An increase in the money supply is a common cause of inflation. However, inflation has not been triggered yet. This is largely due to the fact that the money has not been spent. Most of the stimulus was saved or used to pay down debt (2). As vaccines roll out and fear surrounding COVID subsides, we can expect to see a spike in demand as the economy is flooded with cash. If companies are unable to meet demand, prices may rise quickly. Though fears of hyperinflation are mounting among some economists, many analysts see this rise as cyclical rather than permanent (3). We may see inflation rates rise slightly above the Fed.’s target rate, but they are expected to reverting back to normal levels within the year.

    The Fed. remains dedicated to maintaining low interest rates to aid in economic recovery and has no intention of raising rates until a sustained increase in inflation is observed. Fed. Chairman, Powell seems unconcerned by fears of rising inflation commenting, “we welcome somewhat higher inflation” (4). Slight inflation above the Fed.’s target rate may be good, as it signals economic growth and provides more room for the Fed. to cut interest rates in the future if necessary.


  15. The dramatic rate cuts and monetary easing undertaken by the Federal Reserve in response to the 2020 pandemic led to dramatic dip in the yield on US Treasuries. Yet, in the early part of 2021 we are seeing a dramatic upward trend in 10-year Treasury, leading to an ever-steepening yield curve. This has many investors optimistically awaiting a robust recovery and higher inflation measures as the year progresses and vaccination in the US and globally accelerates. It seems as though the curve is evident of increased confidence in economic growth in 2021 than it is about inflation worries, given rising energy and food prices that are unrelated to underlying demand factors.

    Many investors and observers have worried about the massive stimulus packages Congress has been passing in the wake of the pandemic in March 2020 and massive securities purchases made by the Federal Reserve will lead to high inflation rates, above the 2% target set by the Fed itself. It may seem that there is evidence for this inflation concern as expected inflation is the highest it has been since 2011, according to the Financial Times. But these concerns, as real as they may seem, are not what is driving much of the movement in the yield curve over the last quarter. The Congressional Budget Office projected earlier this month that, across various inflationary indices, inflation is not projected to surpass the 2% by any substantial margin in the coming three years, nor in its long-range projects over the decade.

    The main driver of the steep yield is the optimism many investors have in the economy going forward in 2021. Even many major stock indices are down as of February 25, 2021, in part, due to concerns that tech stock may be overvalued as the economy opens back up with vaccination drives and Treasury yields rise (CNBC).

    While it is yet to be seen whether or not we see vaccination rates drive new COVID-19 cases down to a level where economies can open back up, we can expect continued momentum for rising Treasury yields as we continue 2021 with optimism about future economic growth.

  16. In 2010, the global economy experienced an unprecedented outbreak of the new crown. All major economies experienced a relatively severe recession this year. Central Banks of major developed countries significantly eased monetary policy and created various new monetary policy tools, resulting in a strong rebound in asset prices.
    But after the recession, overseas and domestic economic recovery process is presented completely different state, in particular, the first is the recovery schedule is different, because of the epidemic prevention and control, domestic economic recovery should be far more quickly than overseas; The second is the difference between the pace of recovery, because of policies, the domestic economic recovery is given priority to with the production side, consumption has not yet fully recovered, overseas economic recovery is given priority to with consumers, production recovery is very slow
    The salience of the US economy in 2021 is the shift in the dynamics of economic repair. In the first half of 2021, thanks to the high savings rate, consumer loans, and the upcoming new fiscal subsidy policy, consumer still is an important driving force of economic repair; Application gradually, but in the second half, thanks to vaccine the main driver of economic repair will be transferred to the production side.
    The U.S. economy production the repair is mainly thanks to an inventory and capital spending. Current U.S. manufacturing is in the stage of passive to inventory, in the short-term inventory cycle is also facing a downward pressure. In general, the enterprise expansion capital spending requires three conditions: the first is the capacity utilization rate are high; Second, the repair of corporate balance sheets; Third, the downstream demand significantly improved, cash flow collection is convenient.
    Due to the low base effect, demand-driven, supply-driven, and over-reserve rate reduction, inflation in the United States will have a relatively obvious upward trend in 2021. The second quarter is probably the peak of inflation, which can reach about 4%, and there will be a relatively obvious downward trend after the second quarter. It is difficult for the United States to have hyperinflation again, and it is difficult for inflation to be defined as a complete monetary phenomenon. The core reason lies in the development of modern commercial banking system and financial market.
    Starting from the ultimate goal, we hope for the fed’s monetary policy in 2021 include: (1) although inflation may significantly higher than 2%, but due to not be vicious inflation, the ultimate goal is not likely to change, so the possibility of the fed to raise interest rates very low; (2) The Fed’s PPPLF and MSLP will continue until there is a significant recovery in the US economy, especially on the production side; (3) leverage, financial instability factors, because of the economic recovery, rising inflation, the yield on the 10-year Treasury faces strong upward pressure, thus to control the possibility of yields are also higher.


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