Fed must decide between rate cuts or hikes for long-end yields, Luke Gromen argues - Traders Union
Fed must decide between rate cuts or hikes for long-end yields, Luke Gromen argues - Traders Union
Source: Traders Union
―
DW NOTE
Gromen is stating the constraint plainly: the Fed raised rates last week to 3.75%-4.00% while the 10-year sits at 4.96% and the deficit hit $1.9 trillion this fiscal year. With $1.4-1.8 trillion borrowed through July alone, the Treasury cannot afford yields much higher without debt service consuming an unsustainable share of the budget. The Fed either cuts to suppress long rates and loses inflation credibility, or holds tight and watches fiscal arithmetic force a sovereign debt repricing.