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Kerry: Roles of US Treasury and Federal Reserve to Become Blurred
Summary: In a report by Jinshi, Kerry Group stated that the Trump administration's call for a significant rate cut by the Federal Reserve, coupled with the prospect of increased issuance of short-term bonds in the US, could disrupt the bond market and ultimately push up long-term borrowing costs. Jason Thomas, Head of Global Research and Investment ...
In a report by Jinshi, Kerry Group stated that the Trump administration's call for a significant rate cut by the Federal Reserve, coupled with the prospect of increased issuance of short-term bonds in the US, could disrupt the bond market and ultimately push up long-term borrowing costs. Jason Thomas, Head of Global Research and Investment Strategy at Kerry Group, said, "Bond holders hope to believe that the Fed's duty is to maintain the real value of their principal. If they instead feel that the Fed is more focused on government financing, there may be bond sell-offs and term premium increases." The core issue lies in Trump's continued pressure on Fed decision-makers to lower benchmark rates to stimulate the US economy - a move that would also pave the way for the Treasury to save on interest expenses by shifting towards issuing short-term Treasury bills instead of locking in long-term debt in the current high-yield environment. US Treasury Secretary Mnuchin has proposed this idea in recent months.
