Wall Street Chatter growth that Fed can act as Bond Rout aggravates

(Bloomberg)-there is a growing discussion on Wall Street that the Federal Reserve may have to enter to stabilize the Treasury market as the route that continues to continue US borrowing costs of more than 5%. The increase in US assets as a result of US President Donald Trump’s increasing trade war on Wednesday deepened, and the yield of the 30-year yield of 30 years lifted the highest 5.02%, the highest since 2023 such movements would continue, the central bank would have to act, and Deutsche Bank said, although they differed from the fact that the Fed did. George Saravelos, Deutsche Bank’s global head of FX strategy, said the central bank should deploy a circuit breaker – namely emergency quantitative relief. “If the recent disruption in the US Treasury market continues, we see no other option for the Fed, but to go into emergency purchases from US treasury to stabilize the bond market,” he wrote in a note. Such a move would be far from unprecedented. In 2020, policymakers lowered US interest rates and started a quantitative program to inject large amounts of liquidity into the market to limit the financial outbreak of the pandemic outbreak. Two years later, the Bank of England entered to buy Gilts and Cap yields following former British Prime Minister Liz Truss’s budget of unresolved tax cuts. Meanwhile, Jefferies ‘Thomas Simons says that with volatility in the treasure trove:’ We don’t think we’re too far away from stabilizers coming in. “But his view is that quantitative relief is the wrong way to address the situation. Simons, a senior economist, wrote on Wednesday: “Treasury purchases can raise questions about the monetization of debt in the US and weaken the market’s attraction among foreign investors.” We do not expect the Fed to start buying bonds again soon. ” He suggested that the Fed could be better with the tools it used in crises in the past, including 2020. One potential step, which it took in April 2020, would be to release the treasury and deposits from the supplementary leverage of banks. Front can come as soon as Wednesday, depending on what happens to markets. sidelines, while volatility global markets such a step through the Fed can calm the market in the short term, but Saravelos says that a turnaround from the Trump administration’s policy would be needed to stabilize the medium-term shifts. This includes a slide in the dollar that Deutsche described as a crisis of currency confidence – long since seen as a haven in difficult times. Instead of stacking in the Greenback, international investors are dollarizing in a shift that “plays faster than we even expected”, according to Saravelos. The dollar sold against most major peers on Wednesday on another day of volatile trade. “The market has lost confidence in US assets, so that instead of closing the maladjustment of the assets liability by selling dollar liquidity in the US assets themselves,” he said. (Add comments to Jefferies) More stories like these are available on Bloomberg.com © 2025 Bloomberg MP