GSY - This Free Monetary Lunch Will End Up Being Expensive

• The Fed’s dramatic balance sheet expansion, combined with rampant deficit spending, resulted in a situation where the economic damage from the pandemic was twice as bad as that of the Great Recession of 2008, yet the damage to financial markets was just half as bad.
• The 2-10 spread made further advances last week with the 10-year Treasury yield touching 1.75%, while 2-year Treasuries, heavily correlated to the Fed funds rate, won't move for a few years, as the Fed has short-term rates anchored at a range of zero to 0.25%.
• A steep yield curve is good from a strategic standpoint, as it makes the banking system more profitable and signifies a recovering and accelerating economy. From a shorter-term tactical perspective, it will make the stock market shake.

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