Carlyle: Role of US Treasury and Fed will be blurred

The Carlyle Group said that the Trump administration's call for the Federal Reserve to cut interest rates sharply, coupled with the prospect of increased short-term U.S. bond issuance, could disrupt the Treasury market and ultimately push up long-term borrowing costs.
Jason Thomas, global head of research and investment strategy at Carlyle Group, said: "Bondholders want to believe that the Fed's job is to preserve the real value of their principal. If they feel instead that the Fed is more focused on government financing, then there could be a bond sell-off and a rise in term premiums." At the heart of the problem is Mr. Trump's continued pressure on Fed policymakers to cut the base rate to stimulate the US economy - a move that would also open the way for the Treasury to save on interest payments by switching to short-term treasury securities rather than locking up long-term debt in the current high-yield environment. US Treasury Secretary Vincent Bessant has floated this idea in recent months.