Has Trump Taken Control Over USA Interest Rates?
Interest rates on USA government debt has plummeted by 40% in the last 9-months. Is it because Trump ordered the “independent” Federal Reserve to cut interest rates? Or is something else going on? Is Trump’s power over the Treasury Department and/or his friends on Wall Street in involved?
It defies logic that the yield on the 10-year treasury note fell from 3.24% on 11/8/18 to 2% today because;
- The Federal Reserve hasn’t cut interest rates. The Federal Reserve has historically controlled interest rates. So a 40% decline in 10-year yields without the Federal Reserve’s help is unusual.
- The Stock Market is at Record Highs. Normally when money goes into stocks, it comes out of bonds.
- Massive Supply of Government Debt added to the Market: : The government has a $100 BILLION per month borrowing need. Adding such a massive supply of new debt to the market should result in increased interest rates, not a decline.
- Massive Supply: USA government debt exceeds $22.5 TRILLION. And the debt level will continue growing dramatically unless the government takes actions to curb the massive budget deficits.
- Foreign Purchases of USA debt has been declining.
So why have Wall Street fund managers been so aggressive in their purchase of USA Treasuries? And will these funds continue buying them with the interest rates on long-term debt having declined so dramatically? That is the mystery.