Treasury Secretary Janet Yellen stated that the rise in Treasury yields that increases the cost of the United States government borrowing money is a sign of a “strong economy.’
During an interview with Bloomberg, Yellen said, “A reflection of the resilience that people are seeing in the U.S. economy that we’re not having a recession, that consumer spending and demand continue to be strong, the economy is continuing to show tremendous robustness.”
Bloomberg Washington Bureau Chief Peggy Collins asked Yellen:
“We have seen yields surging over the last few weeks.”
“The 10-year Treasury rose above 5% earlier this week.”
“What’s your view on what is driving that surge in yields, and how much of it is connected to investor’s concerns about the U.S. deficit?”
Yellen responded:
“I don’t think much of it is connected to that.”
“This is a global phenomenon in advanced countries. We are seeing yields go up in most advanced countries of the world.”
“And, largely, I think it’s a reflection of the resilience that people are seeing in the U.S. economy that we’re not having a recession, that consumer spending and demand continue to be strong, the economy is continuing to show tremendous robustness,” Yellen said.
“And that suggests that interest rates are likely to stay higher for longer,” she added.
“And so, part of the increase in yields, I think, is simply a reflection of the strength of the economy, the notion that interest rates will be higher for longer,” Yellen continued.
“Now, whether or not that’s really true, if we look out five or ten years, what are interest rates likely to do? Honestly, for a very long time, we have felt that interest rates over decades had been coming down — real interest rates — and that there were deep structural reasons for that, in part relating to demographics.”
“And those underlying trends, they’re still there, they’re still in force.”
“So, I think it’s perfectly possible that we will see longer-term yields come down, but nobody really knows for sure.”
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