US Treasury Secretary Suggests No Long-Term Bonds Amid Elevated Inflation Era

Macro strategist Jim Bianco has expressed his belief that the US is currently experiencing an "elevated inflation era." In a recent interview, Bianco, the president of Bianco Research, highlighted comments made by US Treasury Secretary Scott Bessent. Bessent stated that he would not issue long-term bonds given the current interest rates set by the Federal Reserve.

Bessent's reasoning was that the current rates are significantly higher than the long-term average, making it an unfavorable time to issue such bonds. He suggested that the optimal time for issuing long-term bonds would have been in 2021 or 2022. Bianco, however, interprets Bessent's comments as an indication of a deeper issue within the bond market. According to Bianco, the current rates are simply a reflection of the new economic environment rather than a market anomaly.

Bianco, known for his inflationist views, believes that the cycle of inflation ended in 2020 and that the US is now in a period of elevated inflation. He clarifies that he is not referring to hyperinflation rates seen in countries like Zimbabwe, but rather a more moderate inflation rate of around 3-4%. Currently, the core inflation rate stands at approximately 2.8%. Bianco warns that if inflation settles at around 3%, the new normal for interest rates could be around 5%, significantly impacting the economic landscape.