Trump seeks lower long-term yields but Warsh's Fed may struggle

The article notes President Trump and administration officials are pressing to reduce long-term U.S. borrowing costs; it also notes that Fed chair nominee Kevin Warsh would have limited ability to lower those long-term yields because they are driven mainly by the 10-year Treasury and a rising term premium.

President Trump and his administration have focused attention on lowering long-term U.S. borrowing costs, according to the article. Treasury Secretary Scott Bessent has been reported as seeking a 10-year Treasury yield nearer a 3 per cent "handle." The piece notes that Fed chair nominee Kevin Warsh would primarily control short-term policy rates, while long-term yields are set by market factors. Those market factors include a rising term premium, inflation expectations, and concerns about the fiscal outlook. Key points: - The administration has publicly pushed for lower long-term borrowing costs and discussed options such as buying more mortgage-backed securities and limits on some interest rates, reported as part of affordability concerns. - The Federal Reserve directly controls short-term policy rates; long-term borrowing costs are largely determined by the 10-year Treasury and investor demand, the article notes. - Markets expect a Warsh-led Fed to cut the fed funds rate this year, but the article reports little indication that long-term yields will fall in step because of a higher term premium and persistent inflation and fiscal concerns. Summary: The reported mismatch between the Fed's short-term policy tools and market-driven long-term yields means cuts to the policy rate may not translate into lower mortgage and other long-term borrowing costs. Undetermined at this time.