From November 2022, the 10-year U.S. Treasury yield curve has been inverted for 25 consecutive months, yet it has not pushed the economy into a recession. During this period, the federal government accounted for 38% of new borrowing in the non-financial sector, compared to the typical 19%-24% during previous inversion periods. The Federal Reserve primarily suppresses household and corporate credit directly, but the private sector currently has lower leverage, longer corporate debt maturities, and significantly reduced sensitivity to short-term interest rates. The ratio of non-financial corporate commercial paper and bank loans relative to bonds has dropped to 21%, compared to 69% and 70% in 1969 and 1973, respectively. Meanwhile, the government will continue borrowing and spending. TS Lombard Chief U.S. Economist Steven Blitz believes that in a fiscally dominant environment, simply raising the federal funds rate would require a larger increase to effectively curb overall demand. If the government continues to expand financing, short-term rate hikes will have limited constraints on the economy, and the real tightening function may increasingly fall on the 10-year and 30-year U.S. Treasury yields.