As officials say changes to capital rules are on the agenda, US bond benefits
(Bloomberg) – U.S. government debt gathered Tuesday to reduce the elimination of decline after Treasury officials said changes to rules that could reduce bank transaction costs.
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The rules change that Deputy Treasury Secretary Michael Faulkender has been on the radar for years helped reduce the Supplementary Leverage Ratio (SLR) (comment on SLR) to the level he last saw amid last week’s market turmoil. Yields have been lowered by 4 basis points due to delays in trading.
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Investors have also been motivated to purchase longer mature Treasury debts at yield levels that provide the most compensation compared to shorter big names for over a decade. Referring to last week, data from the Federal Reserve Bank of New York shows that this period increased to 71 basis points seen in September 2014.
“Giving the bank capital relief capital to buy finances helps in margins,” said Chris Diaz, portfolio manager at Brown Advisory. “I am more concerned about long-term supply and demand issues,” created by the possibility of tax cuts to increase US borrowing needs.
As US economic policies become more difficult to predict, period premiums are increasing. This month, measures of policy uncertainty approached the record after President Donald Trump announced the sweeping fees and then backtracked some. Proposals of tax cuts and the possibility of increasing US government debt restrictions also contributed to the move.
“There are genuine fundamental concerns that not only withdraw positions within market volatility, but also encourage investors to increase higher yields,” wrote Ed Yaldeni, founder of Yadeni Research in New York, in a memo. “Perhaps the possibility of a bill that will acquire new debt that will blow away deficits and policy uncertainty is increasing term premiums on bonds.”
Earlier this month, Treasury Secretary Scott Bescent showed that there was a risk that the federal government would run out of rooms in May or June to make all payment obligations good on time.
The US has long benefited from the abundant demand from foreigners for its debt, which currently holds around 30% in total. This helped to reduce the term premium and reduce borrowing costs, but the trend has been reversed.