Feb. 1 at 4:46 PM
$ALL why I’m going to start loading the boat on insurance companies? Actually started Friday. Small bites. Insurance companies, particularly life insurers, thrive on a steep yield curve—where long-term interest rates are significantly higher than short-term rates.
Warsh's Approach: He has advocated for aggressively shrinking the Fed’s
$6.6 trillion balance sheet.
Impact: When the Fed stops buying (or starts selling) long-term bonds, long-term yields tend to rise. At the same time, Warsh has signaled a desire to cut short-term rates to support the economy.
The Result: This "steepening" allows insurers to pay out low rates on short-term liabilities while reinvesting premiums into new, higher-yielding long-term bonds, widening their profit margins (spreads).
