Part 6/8:
The yield curve’s normalization stems from this disparity: short-term rates dropped slightly while long-term rates surged. This phenomenon is categorized as a "bear steepener," indicating falling short-term bond prices alongside rising long-term bond yields.
The Implications for Treasury Investments
In light of these trends, many seasoned financial analysts have advised caution when investing in U.S. Treasuries. Given the unsustainable levels of national debt—surpassing 120% of GDP—concerns around monetizing debt become paramount. Investors should be wary, as the risks associated with holding long-term bonds, particularly during inflationary cycles, can lead to significant value losses, either through selling before maturity or being unable to maintain purchasing power.