Rising Treasury Yields Linked to Changing Fed Outlook, not Deficit
Dow Jones
Yesterday
1006 ET - The Treasury selloff may have less to do with the U.S. fiscal deficit than analysts suppose. Apollo's Torsten Slok says in a note that the New York Fed's measure of how much yield investors demand to hold 10-year government debt, or term premium, "has moved sideways over the past 12 months," indicating that "there has been no deterioration over the past year in how the market prices US fiscal sustainability or Fed credibility." Slok adds that the U.S. term premium is lower than Japan's or Germany's. He concludes that, with the Fed outlook changing from expected cuts to potential hikes "it is not surprising that long rates are higher."
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