By Artis Shepherd via Mises Wire | December 03, 2024
With much consternation, capital markets participants are watching US treasury bond yields go up while Jerome Powell and the Fed continue to lower the Fed Funds Rate in an effort to spur another round of easy money.
The Fed Funds rate is a short-term interest rate used for interbank borrowing. US treasury bonds are medium-long term securities that represent the sovereign debt of the US government, so the yield on those bonds represents the US government’s cost of borrowing. While there is no law that binds the two, lower rates from the Fed generally translate into lower treasury yields.
Explanations for the divergence have been proffered, talking heads have opined, and conclusions abound with regard to the meaning behind the movement. Given the mixed signals, difficult questions related to the financial health of the US Treasury are being asked. Is the government’s…
