The long-awaited step of the US Treasury yield curve (the inversion ending) has now begun. This is a strong indication that the market is moving from fears of recession towards hopes of economic growth.
🔄 Mechanism
Short end down:
Due to the expected decrease in interest rates by the Federal Reserve (monetary easing), short-term yields are declining.
Long end and above:
Long-term yields remain high or stable due to confidence in economic strength, inflation expectations, and large fiscal deficits (debt pressure).
The larger the gap between short-term falling yields and long-term stable/rising yields, the more stepped the yield curve will be.
📊 Investment Strategy (Investment Playbook)
Financials (Banks — $BANK): The biggest beneficiaries
Banks borrow at lower rates and lend at higher rates in the step curve, which directly improves their net interest margin (NIM)—the basis of profitability.
Industrials and Real Estate:
Investment and property purchases become cheaper due to low short-term interest rates.
High yield bonds:
An improved economic outlook reduces the risk of default, making higher yields appear relatively safe and performance better.
📢 Market Message: Money is becoming cheaper, and economic growth is expected to continue.
