One of the topics that comes up whenever government bond curves re-price is the relationship between the yield curve and bank net interest margins (NIM). This then morphs into a second question: does a yield curve inversion cause a recession by the (alleged) effect of the yield curve on bank interest margins, reducing the willingness of banks to lend?
i'm not sure i understand this part: "the synthetic short bond position would act to cancel out the duration of fixed coupon assets."
i can grasp the contours, obviously, but i can't fully imagine the canceling out. is there a good reference to pursue further?