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NS child killer Penny Boudreau and the path to eventual release | SaltWireWASHINGTON - Even as the U.S. economy bounds along, rising interest rates on government bonds could threaten the plans of elected officials and central bankers who thought they had set the stage for a steady period of ongoing growth, low unemployment and gradually falling inflation.
"It's not obvious that it is putting a huge amount of pressure on households or businesses," Treasury Secretary Janet Yellen said in an interview with the Financial Times that was published on Monday, ahead of the start of the International Monetary Fund and World Bank annual meetings in Morocco. The eruption of violence in Israel over the weekend could change bond market dynamics, as elevated global political risk stokes demand for safe-haven assets such as U.S. government bonds. Indeed, Treasury yields were down by the most in more than a month early on Tuesday.
Surges in bond yields can reverse as quickly as they occur. If the Fed's current outlook proves correct, a combination of slowing growth and falling inflation may drive credit costs lower next year as the central bank pivots from its current high-rates strategy and cuts borrowing costs. Add in the Treasury's need to sell more bonds to finance large deficits, and the foundation is laid not just for higher U.S. government borrowing costs, but also for other countries and companies competing for the world's supply of savings.
To a large degree rising rates on government bonds and the pass-through to household and business credit are what the central bank wants to happen alongside its own rate hikes.
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