CIFC Says Fed May Be Losing Control of Long-Term Treasury Yields
Summary
- CIFC said long-term U.S. Treasury yields are being influenced more by external factors such as government borrowing and global oil prices than by Fed monetary policy.
- CIFC said heavy U.S. government borrowing, global oil prices above $100 a barrel, investment in AI infrastructure, and a global bond selloff are driving long-term Treasury yields higher.
- CIFC said long-term Treasury yields risk staying elevated even if the Fed tightens further, and said weak demand at recent five-year Treasury auctions is supporting upward pressure on yields.
Forecast Trend Report by Period
Long-term U.S. Treasury yields are being driven more by external factors such as government borrowing and global oil prices than by Federal Reserve monetary policy, according to an analysis by asset manager CIFC.
Walter Bloomberg reported on September 24 that CIFC identified heavy U.S. government borrowing, global oil prices above $100 a barrel, investment in artificial intelligence infrastructure and a global bond selloff as key factors pushing long-term Treasury yields higher.
CIFC said the Fed's rate increase last week changed the shape of the yield curve but did not lower Treasury yields overall.
The firm also said weak demand at a recent auction of five-year U.S. Treasuries was reinforcing upward pressure on yields. As a result, long-term Treasury yields risk remaining elevated even if the Fed moves to tighten further.
JH Kim
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