Bad Gurl

This opinion piece argues that US Treasury Secretary Janet Yellen is steering policy to prevent a bear steepening of the Treasury yield curve, which the author says would threaten the banking system. The author predicts a net liquidity injection of $1 trillion, the current size of the Fed's Reverse Repo Program, as money market funds move from the RRP into T-bills. The author also contends that the Fed's recent pause in rate hikes and its inflation metrics are part of this strategy, and cites Bank of America's reported $132 billion unrealised loss on held-to-maturity assets in Q3 2023 as an example of the risk.