ECONOMY/TAXES/TREASURY/TRUMP AS PRESIDENT: “Two of the most powerful economic forces in Washington could be aligning in coming years to put considerable upward pressure on long-term interest rates.
President Donald Trump is flirting with tax and spending plans that could widen the budget deficit, just as the Fed flirts with plans to shrink its $4.5 trillion portfolio of bond and other holdings. Larger deficits could mean that the supply of U.S. Treasury securities hitting the markets is rising just as demand for these securities diminishes with the Fed unwinding.
More supply and less demand tends to mean lower prices, and with bonds, lower prices mean higher yields and interest rates.”
-Josh Zumbrun, “Trump’s Fiscal Plans, Fed’s Asset Unwinding Could Fuel Rate Rise,” The Wall Street Journal online, May 7, 2017 12:40pm