President Trump swore in Kevin Warsh as the 17th Fed Chair on Friday, replacing Jerome Powell. Powell inherited the role with the 10-year Treasury yield at its highest level on any Fed chair’s swearing-in date since Alan Greenspan in 1987. That could complicate the Fed’s rate outlook, especially given Trump’s previous calls for rate cuts.
Meet Samuel – Your Personal Investing Prophet
- Start a conversation with TipRanks’ trusted, data-backed investment intelligence
- Ask Samuel about stocks, your portfolio, or the market and get instant, personalized insights in seconds
The 10-year yield has surged 26 bps over the past month amid higher expectations of inflation caused by rising oil and gas prices.
Deficits and Inflation Push Long-Term Yields Up
Other factors have contributed to higher yields as well, including the fiscal deficit, elevated Treasury issuances, and stronger-than-expected economic growth. Goldman Sachs Managing Director Phillip Lee expects long-term yields to continue rising, driven by the potential of elevated inflation and issuances.
With higher inflation, investors require a higher return to compensate for the erosion of purchasing power and the increased risk of holding long-duration assets.