Macro Matters: Yield-Curve Scenarios with BNY’s Granet

The latest episode of Bloomberg Intelligence’s FICC Focus series brings BNY Mellon’s chief investment officer Jason Granet into the conversation about the U.S. yield curve. Granet argues that the recent flattening of Treasury rates is a short‑term, cyclical retracement rather than a lasting structural change. He expects the curve to resume steepening as the economy absorbs higher short‑term rates and longer‑term inflation expectations stabilize. This perspective challenges more bearish forecasts and provides investors with a clearer framework for interpreting current market moves. This insight aids strategic allocation decisions.

Granet and co‑hosts Ira Jersey and Will Hoffman then turn to Federal Reserve policy, emphasizing its outsized influence on Treasury yields. They note that the Fed’s balance‑sheet normalization and forward‑guidance will shape the slope of the curve more than any single rate hike. BNY’s risk‑sizing model incorporates these policy scenarios, assigning capital to positions based on projected curve shifts and funding pressures. By quantifying the probability of steepening versus flattening, the firm aims to protect portfolios while capturing upside from rate‑sensitive sectors and enhances risk‑adjusted returns.

Finally, the discussion highlights funding markets, where liquidity remains ample despite tightening monetary conditions. Granet points out that corporate bond issuance and repo activity continue to support short‑term funding, mitigating the risk of a sudden curve inversion. For business leaders, these dynamics signal that borrowing costs may stay predictable, but vigilance is required as policy shifts could accelerate curve movements. Understanding BNY’s macro framework equips investors with actionable insights, helping them navigate rate volatility and align capital allocation with the evolving interest‑rate environment and maintain competitive advantage.