The 10YR Will March Higher If...
The more gasoline the Fed throws on the burning Dollar, the higher the 10YR Treasury yield will climb over time.
The same can be said for deficit-centric fiscal policy. The elevated 10YR yield ensures that the Federal Government will finance itself at the short end of the yield curve.
Having a concentration of fiscal debt at the short-end only increases credit risk. As a consequence, the next Fed Chair will pursue zero interest rate policy (ZIRP), which will only drive yields higher at the long-end, thereby exacerbating the problem. This is when the Fed will try to exercise yield curve control. It is unclear if such a strategy will work as yield curve control by definition creates new money, thereby further inflating the money supply. Long yields are likely to march higher in response to such inflationary policy. This is a monetary vicious cycle.
