Pro-Growth Policies by Trump Could Boost Yields in US

The Trump administration’s market-friendly mix of policy initiatives could significantly boost U.S. 10-year Treasury yields within 2½ years, strategist Jason Trennert told CNBC on Friday.

The Strategas Research Partners chief investment strategist predicted on “Squawk Box” that while yields could flatten in the short term, they may reach 5 or 6 percent over the next few years.

“The Trump administration policy mix is highly reflationary, which means to me the yield curve is going to steepen, [and] you’re going to see a lot more markets activity,” Trennert said.

“Two-and-a-half percent 10-year Treasury yields, in my opinion … they could go down in the short term, but it seems to me over the next year or two, they’re going to revert back to something that’s closer to nominal GDP, which by our likes could be something like 5 to 6 percent,” he continued.

Trennert added that nominal GDP growth and 10-year Treasury yield movements are often correlated, which could justify the move.

If yields do move up, investors could switch their cash from equities into bonds, but with interest rates low, that migration could be long in the making, the strategist said.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza