Treasuries Dismiss President's Promise: 3-Minutes MLIV

Summary

Mark Cudmore discusses President Trump's promise to send $5,000 to American adults if Republicans win both houses, estimating a $1.2 trillion fiscal cost into an already strong economy. He argues markets are dismissing the pledge as unrealistic, but it still reinforces the long-term fiscal deficit that should push Treasury yields higher over the next year. He also flags a short-term CPI-driven setup in Treasury yields and sees France as the bigger sovereign debt-strain problem due to politics and high debt.

• Trump's midterm promise would add roughly $1.2 trillion in debt.
• Markets view the $5,000 check proposal as highly unlikely.
• Long-term US fiscal deficits are seen keeping upward pressure on Treasury yields.
• Near-term Treasury yields face a genuine two-way reaction around CPI.
• France's long-end yields have surged on election and budget concerns.
• France's 117% debt-to-GDP and expected fiscal spending make it a bigger debt-strain risk.