The yield on 30-year U.S. treasury securities closed at 1.863 percent on 8 January, up almost a quarter-point since the year began, TradeWeb reported, as investors bet that soon-to-be president Joe Biden and a Democratic Congress will unleash “trillions” more stimulus money and federal spending by promising to take on expensive infrastructure projects and offering aid to states and municipalities. Those moves would drive brisker economic growth and, with it, inflation.
The 10-year Treasury yield also has topped 1 percent for the first time since March, closing last week at 1.13 percent.
When bonds’ yields rise, their prices fall. As a result, bondholders have seen the value of their investments sink so far this year. Thirty-year Treasury bonds have lost more than 4 percent this month and 10-year bonds are down about 1.5 percent, according to FactSet.
TREND FORECAST: We also forecast that should the Democrats move forward with their proposed stimulus packages, the more cheap money they inject into the economy, the further the dollar goes. Additional stimulus spending will dump more dollars into world markets, further diluting its value unless the U.S. Federal Reserve raises interest rates, which it has pledged not to do at least through this year and possibly until 2023.
Thus, the weaker the dollar gets, the higher gold, silver, and bitcoin prices will rise as “investors” seek safe-haven alternatives.
In 2020, the buck lost about 7 percent of its value against benchmark world currencies.
The Fed also has said it will allow inflation to rise above 2 percent without raising interest rates in response. Given a slow economic recovery, that could keep U.S. interest rates near zero for years.
Other countries will decide they “are not in a position to keep on printing [money] and doing fiscal policy without a constraint,” Steven Englander, chief of currency research at Standard Chartered, commented to The New York Times. “The U.S. will be slower to get there.”
Goldman Sachs has predicted the dollar’s value will decline 5 percent this year; Bank of America sees the buck sliding 2 percent against the euro in 2021.
China’s forceful economic recovery and rising currency value are likely to lift emerging markets, luring investors away from dollar-denominated assets and sending them to other countries and currencies in search of higher returns, analysts say.
