Analysis: Lower Treasury yields could require a weaker economy. Trump won't fix them — SkimNews
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- 10-year Treasury yield has risen about three-quarters of a percentage point over the past six months to roughly 4.8% — the highest of Trump's second term — even as the administration tries to lower it
- Treasury Department will begin increasing buybacks of long-term debt next week to improve market liquidity, while investors await new Federal Reserve Chairman Kevin Warsh's reaction to inflation above the Fed's 2% target
- Ludovic Subran, chief investment officer at Allianz, said "soaring deficits, Fed unfazed by inflation, Treasury tampering with markets" are adding credit-risk-like premiums to US debt, leading Allianz to avoid US duration because "we were not making money" after hedging and inflation
- Mortgage rates have climbed to nearly 6.8% alongside the 10-year yield, with auto loans and other consumer debt moving in tandem
- Congressional Budget Office revised this fiscal year's deficit forecast up to $2.1 trillion, likely exceeding 6% of GDP, and the US is projected to hit its $41.1 trillion debt limit between late winter and mid-summer 2027
- JP Morgan estimates Nvidia and five major tech firms — plus special-purpose vehicles backing their data-center leases — have issued about $320 billion in debt this year, with hyperscaler supply potentially distorting the long end of the yield curve
- Norway's sovereign wealth fund is considering shifting roughly $80 billion currently in government bonds into higher-yielding mortgage-backed securities
- NY Fed President John Williams told CNBC the 67-basis-point rise in 10-year TIPS yields (to 2.43%) over six months "is more of a reflection of the strength of the economy" — and that it may take an economic slowdown to cool borrowing costs
Why it matters: Americans already paying near 6.8% mortgage rates face limited relief without an economic slowdown that itself would undercut growth — a tradeoff an 80-year-old president unlikely to change course appears unwilling to engineer, leaving global investors like Allianz demanding higher risk premiums to keep lending.
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