TD's Misra Warns of a Yield Curve Bear Steepening

The video tutorial discusses the differences between bear and bull steepening, emphasizing their impact on the economy. Bear steepening involves higher rates led by the long end, while bull steepening involves lower rates led by the front end. The discussion highlights how longer-term rates affect the mortgage market and consumer behavior. The speaker predicts that the US 10-year rate could reach 3% due to quantitative tightening and global rate rises, which may tighten financial conditions and impact the Fed's ability to hike rates above neutral. The video concludes by examining the potential for economic slowdown if bear steepening occurs.

What is the primary characteristic of a bull steepening?

• Stable rates across all terms

• Lower rates led by the front end

• Higher rates led by the front end

• Higher rates led by the long end

How do longer-term real rates affect the economy?

• They only impact government bonds

• They influence the mortgage market and consumer spending

• They primarily affect short-term investments

• They have no significant impact

What is one consequence of quantitative tightening?

• Looser financial conditions

• Increased consumer spending

• Tightened financial conditions

• Decreased interest rates

What might prevent the Fed from hiking rates much above neutral?

• A decrease in global rates

• The rise in long-term real rates

• A stable economic growth

• A decrease in consumer spending

What could happen if bear steepening occurs?

• Interest rates might decrease

• The Fed might increase rates significantly

• The economy might slow down faster than expected

• The economy might accelerate