A Little Economic News in the Midst of the Election Aftermath

There were auctions of US debt this week.  The last sale, on Wednesday, was $25 billlion in 30 year bonds.  The interest rate was acceptable in terms of the auction, but significantly higher than the prior month’s.  Demand characteristics were good.  Yesterday the Federal Reserve cut rates by a quarter point.  In the market, yields generally have dropped this week amid the election and uncertainty about the economy.  Be interesting to watch how this starts to settle out in the next week.  Trump hasn’t really focused on debt.  We will see if there are serious efforts to reduce spending.  He certainly won’t be raising taxes, so the only deficit relief will come from spending cuts.  Talking about higher growth sounds great, but you would need a huge bump in growth, to the area of 4% or 5% in post-inflation rates, to make a substantial jump in federal revenue.  Unless and until the market sees real progress on the deficit, I predict that rates will stay high on federal debt and linked interest rates, like mortgage.