Aggressive Treasury yield cap could weigh on dollar, says Citi’s asset allocation head - whbl.com
Aggressive Treasury yield cap could weigh on dollar, says Citi’s asset allocation head - whbl.com
Source: whbl.com
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DW NOTE
Citi floats a trial balloon: cap Treasury yields and watch the dollar fall. The thesis is that aggressive yield suppression would reveal the Fed's hand — no longer setting rates, just controlling them — and currency markets would reprice accordingly. They're not wrong. Japan spent decades proving that a central bank willing to buy unlimited bonds to hold yields down eventually devalues its currency, because the policy is indistinguishable from printing money to finance the state. The dollar's reserve status has delayed that reckoning, but it hasn't repealed the logic.