Despite occasional mediocre auction results, most sales of longer term US debt are indicating buyer reluctance except at higher than desired interest rates. Twenty and thirty year bonds are where most of the resistance is showing up at this point. The Federal Reserve is expected to cut rates today, but I will keep saying that in the long run that will make no difference. The size of the debt and the needed sale of new debt is causing the resistance. Yesterday, the offering of a measly $13 billion in twenty-year bonds was met with no enthusiasm. The interest rate paid was higher than desired and demand characteristics were weak. These aren’t disastrous auctions, just warning signs that the disaster is impending. At some point we will have a really bad auction and then interest rates will soar, investors will have big losses on recently purchased bonds and stocks will take a hit as well. Meanwhile neither party says a word about how they will eliminate the deficit and reduce debt. (ZH Post)
It seems to me Powell is trying to normalize the yield curve while Yellen is tryin to keep it inverted. And I expect the Fed to continue slowly shrinking its balance sheet.
I still think Congress will eventually force 401k and IRA contributions for under-55 to be a percentage of 10+ year treasuries.