Remarks from Deutsche Bank Securities economists on higher yields, saying the Federal Reserve will welcome these due to how strong the US economy is given recent data and GDP projections.
Main points:
- Higher yields will serve to tighten financial conditions and lending
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“I think that the Fed should be comfortable with higher rates, tighter financial conditions, because you know, some of the things that they need to see are slower growth and a labor market that’s coming into better balance. Tighter financial conditions will help with that,”
- “I’m not of the view that they are thinking this is an inappropriate tightening of interest rates”
- Financial conditions had eased a lot earlier in the year
- The recent pickup in yields has actually brought the market into better alignment with the Fed’s thinking about rates over this year and next
I posted also from Barclays in their assessment of higher yields not being too bad a thing either:
The USD has been gathering support from the ‘higher for longer’ turn.