Trump Policies Stall US Bond Yield Lowering Efforts Amid Rising Deficits

The US government's attempts to lower bond yields have been hindered by policies from President Donald Trump's administration, which are keeping yields higher despite efforts to bring them down. The Treasury Department is set to increase its buybacks of some long-term US debt next week in an effort to improve market liquidity.

Ludovic Subran, chief investment officer and economist for Allianz, says the rise in yields is 'pure economics,' driven by factors such as soaring deficits, the Federal Reserve's inaction on inflation, and Treasury's tampering with markets. He notes that US debt has become more price-sensitive over the years as central banks and reserve holders have stepped back as buyers.

Subran says Allianz has had to pay more to hedge its bets in the US due to these factors, and has decided not to invest in US fixed-income market like before. The rise in yields is a source of aggravation for Americans already frustrated by affordability problems, with mortgage rates reaching nearly 6.8%.

New York Federal Reserve President John Williams suggests that the rise in real yields may be 'more of a reflection of the strength of the economy,' and that it may take an economic slowdown for borrowing costs to cool. However, this is not a solution anyone would want to root for.