To The Moon

图片

US Treasury Secretary Janet Yellen told reporters on Wednesday that market interest rates in the United States are "unlikely" to return to pre-pandemic levels. As for the reason, it all boils down to the Covid-19 pandemic in previous years, as well as the chain reaction triggered by the surge in inflation and the Fed's interest rate hikes.

On Monday, President Biden announced a budget plan for 2025 totaling around $7.26 trillion, with interest rate predictions for the next few years much higher than they were a year ago.

When asked about the reason, Yellen responded that the new numbers were consistent with private sector predictions, adding that it was unlikely that Treasury yields would return to the low levels seen before the pandemic.

Although the pandemic is over, its "aftereffects" have remained, and relatively higher inflation and interest rates may become the new normal.

During the decade ending in 2019, the average yield on 10-year US Treasuries was 2.39%, which was historically low. But in an effort to tame inflation, the Fed embarked on a round of aggressive interest rate hikes, and rates surged to over 5% last October, currently hovering slightly below 4.2%.

It's worth noting that while US inflation has declined somewhat after the rate hikes, it's still stubborn, and the market's expectations for a Fed rate cut have been pushed back repeatedly. Therefore, whether interest rates will return to pre-pandemic levels or remain at relatively high levels for a long time has become a hot topic among economists and market participants.

According to the new White House predictions, the average interest rates for 3-month and 10-year Treasuries in the next three years are much higher than the predictions made a year ago. For example, the average rate for 3-month Treasuries has risen from 3.8% predicted in March last year to 5.1%, and the 10-year Treasury yield prediction has increased from 3.6% to 4.4%.

Based on these predictions, the White House expects interest expense in the US this year to be around $890 billion, accounting for 3.1% of its GDP.