U.S. President Donald Trump holds a meeting with members of Congress at the White House in Washington, U.S., February 13, 2018. REUTERS/Kevin Lamarque

The Federal Reserve is reducing its holdings of Treasury bonds at a time when the US government is about to ramp up issuance amid surging budget deficits.
Bob Michele of JP Morgan Asset Management, says he’s closely watching the trend, but believes there will be enough overseas demand to prevent a crippling spike in US borrowing costs.
“There’s no doubt that what we’re seeing coming out of the budget, the US is losing its fiscal discipline, and you’ll see increased supply coming out of the Treasury at a time when the Fed is reducing its holdings,” he said.

The Treasury is about to ramp up its issuance of new bonds as budget deficits spike, at a time when the Fed is reducing its own holdings. That’s putting enough upward pressure on US interest rates to shake the stock market out of a prolonged bullish stupor. And that has the attention of big-time money managers.

Bob Michele, JPMorgan Asset Management’s chief investment officer for fixed income, currencies and commodities who oversees $470 billion in assets, told Business Insider he is paying close attention to the dynamic of a market that will see a ramp-up in supply in the wake of tax …read more

Source:: Businessinsider – Finance


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