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‘The Hassett Premium’
One consequence of a Kevin Hassett Fed is likely to be increased market concern around rekindled inf
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With Treasury continuing to shift issuance toward bills, Fed rate cutting will become a budgetary imperative. The average rate on Federal debt is about 3.35-3.36%. Why not have the Fed take short rates to 1% and have Treasury issue almost entirely bills to bring the average rate down to 2%? Then have the Fed buy the pesky high-rate coupon debt to bring the average rate down even further? Sure, the US will have to roll over appx $30TR of debt every few months, and if even there isn’t enough bill demand . . . no problem, just have the Fed buy the rest! To Trump, I think, the Fed is a Magic Money Tree.