Stanley Druckenmiller told Wall Street investors that US interest rates remain too low and dismissed Federal Reserve officials who call current policy restrictive. His comments landed the same day Treasury yields pushed toward 5% after a weak 30-year bond auction and a bigger buyback operation failed to reassure the market.
Stanley Druckenmiller told investors at a Piper Sandler conference in New York on Thursday that US borrowing costs remain too low, according to the Financial Times, and criticized Fed officials who describe the current policy as restrictive.
Druckenmiller dismisses 'restrictive' talk
The macro hedge fund manager said rate cuts are no longer needed. According to the Financial Times: "fed funds rates are restrictive are just ridiculous" Druckenmiller said, pointing to asset prices around the world as his evidence.
Druckenmiller is a longtime mentor to Treasury Secretary Scott Bessent and a close ally of Fed Chair Kevin Warsh, though he said he is no longer allowed to speak with Warsh directly. He had already criticized Bessent's expanded bond buyback program in a Wall Street Journal opinion piece last month.
Bessent's bigger buyback falls flat
Treasury said Wednesday it would purchase up to $6 billion of bonds maturing in 10 to 20 years, triple the $2 billion cap it used previously and above the $4 billion minimum Bessent had outlined last month. Even so, traders who expected a larger operation were left unsatisfied.
The 10-year Treasury yield climbed to its highest level since November 2023 after the announcement, while the 20-year yield reached a three-week peak and the 30-year yield did the same. A $6 billion operation is small next to the roughly $32 trillion Treasury market, analysts said, and US debt has surpassed $40 trillion.
Yields push toward the 5% threshold
Yields moved higher again Thursday after a $22 billion sale of 30-year bonds drew soft demand and the Treasury's actual buyback purchases reached only about $5.2 billion, short of the promised ceiling. The 10-year yield rose 11 basis points to 4.95%, putting it in jeopardy of hitting the 5% mark.
Fresh wholesale inflation data and Brent crude climbing above $105 a barrel added to the unease. The odds of a Fed rate hike next week jumped to about 70%, up from closer to 61% a day earlier, according to the CME FedWatch Tool.
Jim Barnes, director of fixed income at Bryn Mawr Trust, said the Treasury's active intervention suggests strains in the bond market may run deeper than investors had assumed.
Sources: Investing.com, Investing.com, MarketWatch
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