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“Moretti Associates”– US Bond Yields Up On Tax Deal …

Todays Date: January 21, 2019

Analysts at “Moretti Associates” suggest that opinion is divided as to whether rising yields are good or bad.

“Moretti Associates” strategists admit that it is too early to determine whether the recent surge in yields on US bonds signals optimism or potentially disastrous.

Investors have been selling bonds at a quickening pace since the Obama administration struck a compromise deal with the Republican-controlled House of Representatives over Bush-era tax cuts.

According to one of the “Moretti Associates” strategists, “The problem is that it’s hard to determine whether investors are selling because they anticipate the tax cuts will boost economic growth through 2011 or simply because they’re growing more concerned about US fiscal profligacy.”

The former theory would be most welcome and indicate that investors remain bullish on US economic outlook going forward but, should the latter theory prevail, the consequences for America could be calamitous.

“The US has enjoyed the ability to borrow money quite cheaply compared with European countries but, if their borrowing costs rise, the Federal Reserve may be forced to step in to buy even more treasury bonds,” said a “Moretti Associates” analyst.

Much to the Federal Reserve’s chagrin, bond yields have been rising steadily since the QE2 announcement but the tax cut deal has only exacerbated the situation.

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