One of the topics that has come up in the past week is the big yield curve inversion that freaked everyone out. My question is:
What causes the yield curve to invert?
I understand the yields drop because more investors are buying into the longer-dated bonds, pushing the yields down. But I would think that the $ volume of such transactions would have to be immense across the investment world and investors to actually cause it to invert so suddenly. So how does that happen? Is it just one big AM, such as Blackrock, making a move which is followed by other investors watching the big players and following suit?
How is the decision to go long made at some of these AMs? Is it a top-down decision or is it more so traders moving their book which causes the yield curve change?
Let me know if any of my points above is unclear.