“One of the concerns is that the deficit will widen,” said Yardeni by phone.
JPMorgan Chase & Co. strategists last month lifted their forecast for net new Treasury debt in 2018 by about $100 billion, to around $1.42 trillion, after the passage of the tax bill. Net sales in 2017 totaled about $550 billion.
Against a backdrop of solid economic fundamentals -- synchronized growth and strong corporate earnings -- investors would normally step in to buy the dip, but government rates remain under pressure and this week’s Treasury auctions have underwhelmed, raising the prospect that the debt selloff could resume.
Mnuchin on Tuesday said the increase in debt issuance is not contributing to market volatility. “The debt markets are one of the most liquid markets in the world and are reacting very well.”
Some economists agree. While the tax plan will increase federal borrowing, it’s not the main driver over the next 10 years, said Brian Riedl, a senior fellow at the Manhattan Institute and a former chief economist for Ohio Senator Rob Portman. “Even without the tax cuts, we would be facing a huge deficit this year,” he said.
“There’s no appetite in Washington for fiscal discipline, period,” Riedl said. The election of President Trump has convinced Congress that voters don’t care about the deficits.”
This article was provided by Bloomberg News.