Treasury Yields Jump After Trump Budget Director Admits Interest Rates May "Spike" On Soaring Deficit

In a bizarre warning coming from president Trump's own budget director, one that could accelerate the sharp market selloff which so infurated Trump last week he tweeted about it on several occasions, lashing out against those who sell stocks on "good news" claiming it is a "big mistake", Mick Mulvaney warned that the U.S. will post a larger budget deficit this year and could see a “spike” in interest rates as a result.


White House budget director Mick Mulvaney.

Of course, traders have already experienced the spike, or at least a part of it: it's one of the key catalysts that moved the 10Y from 2.60% to 2.90% since payrolls Friday (coupled with the inflationary impulse from the jump in hourly wages).

Earlier in the day, Mulvaney spoke on “Fox News Sunday,” a day before the White House is expected to release 2019 spending proposals - and after weeks in which financial markets have been spooked by prospects for rising inflation tied to higher deficits and lower taxes.

“This is not a fiscal stimulus; it’s not a sugar high,” Mulvaney said on of the president’s economic program, including the $1.5 trillion tax cut passed in late 2017. “If we can keep the economy humming and generate more money for you and me and for everybody else, then government takes in more money and that’s how we hope to be able to keep the debt under control,” Mulvaney said.

In a separate interview on CBS News’s “Face the Nation,” Mulvaney said rising budget deficits are “a very dangerous idea, but it’s the world we live in.”

As Bloomberg notes, his comment echoed Trump’s Feb. 9 tweet that Republicans “were forced to increase spending on things we do not like or want” to secure Democratic votes for the sharp buildup in military spending wanted by the White House and the Pentagon.

“What they said was they would not give us a single additional dollar for defense unless we gave them dollars for social programs,” he said. “They held the Defense Department hostage, and we had to pay that ransom.”

Shockingly, Mulvaney also acknowledged he would “probably not” have voted for the deal when he served in the House of Representatives and was known as a fiscal hawk. "Keep in mind I’m not Congressman Mick Mulvaney anymore," he said. "My job as the director of the Office of Management Budget is to try to get the President's agenda passed."   

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The next set of numbers - and potential catalyst for further rate upside - will be unveiled on Monday, when Mulvaney's OMB will updating the 2018 budget released last year and its 2019 request, due Monday, in response to the two-year budget deal the president signed into law on Friday morning. That agreement, which ended an hours-long partial government shutdown, will boost government spending by another $300 billion, which will have to be directly funded with more debt. Mulvaney said that in his previous job as a fiscally-conservative congressman representing South Carolina, he would “probably not” have voted for the bill.

The additional spending could increase the deficit to about $1.2 trillion in 2019, and there’s a risk that interest rates “will spike” as a result, Mulvaney said.

And while Mulvaney said that lower deficits are possible over time based on sustained economic growth, in an even more bizarre development, the WaPo reported that Trump’s Budget to be unveiled tomorrow won't project a balance in 10 years, and instead Trump's request will abandon the long-held Republican goal of eliminating deficit in budget projections, even over a decade.

In other words, those concerned that yields may spike further tomorrow - and slam stocks - have good reason: the OMB may unveil the first republican non-balancing budget. Actually, one look at the 30Y Treasury shows that the selling has already begun.

Comments

All Risk No Reward Baron von Bud Mon, 02/12/2018 - 01:51 Permalink

You think wrong.

The Fed isn't working for you.

The Fed is working for the Money Power Sith Lords that control it...  and also lend money to the US government through its Mega-Corporate Banking Complex.

The main reason for the debt-money bubble IS TO CREATE THE DEBT-MONEY BUBBLE BUST!

Why, you ask?

That's easy.  Most debt has collateral associated with it.  THE MONEY POWER CORPORATE FRONTS SEIZE TRILLIONS IN PHYSICAL REALITY WHEN THEY BANKRUPT THE DEBTORS.

The only problem is they have to make sure their Mega-Corporate Banking Complex is too big to fail and too big to jail.

Hmmmm, that will be a problem.  What?  Really?  THEY ALREADY MADE THEIR MEGA-CORPORATE BANKING COMPLEX TOO BIG TO FAIL AND JAIL!!!!

“The new law will create inflation whenever the trusts want inflation. From now on depressions will be scientifically created.”
~Congressman Charles A. Lindbergh, after the passage of the Federal Reserve act 1913.

“The people are naturally conservative. They are more conservative than the financiers. Those who believe that the people are so easily led that they would permit printing presses to run off money like milk tickets do not understand them. It is the innate conservation of the people that has kept our money good in spite of the fantastic tricks which the financiers play — and which they cover up with high technical terms. The people are on the side of sound money. They are so unalterably on the side of sound money that it is a serious question how they would regard the system under which they live, if they once knew what the initiated can do with it.”
~Henry Ford, My Life and Work, p. 179

In reply to by Baron von Bud

Meat Hammer wee-weed up Sun, 02/11/2018 - 23:56 Permalink

“On Soaring Deficit"

Oh, so now it’s soaring?! I guess during Obunghole’s two terms, it was just growing a teeny itsy bitsy little bit.

More proof that Trump’s orders are to destroy the economy so that small government and capitalism shall be blamed. RIP Republic of the United States of America.

So many of us predicted this during the 2016 campaign. Trump and Hillary will be clinking champagne glasses in their ivory tower while they watch Rome burn. 

In reply to by wee-weed up

mkkby ACP Sun, 02/11/2018 - 23:03 Permalink

More voodoo economics, where we speak in opposites.  I voted for Trump, but now I don't care if he's impeached.  The blues and reds are all libtard socialists.  We need to sweep them aside 1776 style and form a new gov't.

When the US becomes Venezuela and your family is starving, have a congressman over for a bar-b-que pig roast.

In reply to by ACP

Antifaschistische mkkby Sun, 02/11/2018 - 23:16 Permalink

because, you thought Trump would be a 'balance the budget' guy?   Guess what...neither would you, and neither would Rand Paul.    We ZH'er know we're on the titanic, but you've had 30 years to prepare for the collision so let's hope you've done the wise thing.  As for me...I hope we've got another few years to prepare, and yes, I do believe that Trump has lengthened our fuse, even though none of us know how long it is.

Preparing = stacking everything (except for debt)  cash, commodities, oil, bullets.   downsizing your life, learning more skills and certifications within your profession...learning skills outside of your profession...being bi/tri lingual and have at least one country in mind with a tentative exit strategy.

In reply to by mkkby

Blano Antifaschistische Mon, 02/12/2018 - 00:34 Permalink

"As for me...I hope we've got another few years to prepare, and yes, I do believe that Trump has lengthened our fuse, even though none of us know how long it is."

That, and beating Hillary, is why I voted for Trump. Anything other than that would be a bonus. He just gives us more time to prep for either economic calamity or the Democrats' return to power, which is when the Civil War will go hot.

In reply to by Antifaschistische

mkkby Antifaschistische Mon, 02/12/2018 - 00:59 Permalink

I'm prepared, thank you very much.  Three years ago I moved far away from any city that will have rampaging Obama sons at the first sign free shit may be ending.  That greatly reduces my need for personal security, or having to protect those "stacked" provisions.

I don't know why you would assume I wouldn't balance the budget if I could.  Politicians are narcissist sociopaths who crave power, and only do what will keep themselves in power.  Regular people don't give a shit about that.  Only what works.  My friends and I all live frugally, and would probably cut gov't 80% or more.

Why should a person not physically disabled get a free handout?  Get to work.  Even a blind person or wheel chair person can answer phones or do computer work.  Charity should be for the truly needy.  Too proud to wash dishes?  Then go hungry.

In reply to by Antifaschistische

Decoherence IH8OBAMA Mon, 02/12/2018 - 00:31 Permalink

Because they know it's coming, and they know they can't do a damn thing about it at this juncture.  Banking cartels will step in and start buying bonds again because no one else will be stupid enough to tie their money up in a country determined to devalue their currency and import inflation because it can't stop spending, shed its dead weight and resume production.  Bond auctions are looking weaker all the time.  Bonds and the USD will nose dive together at some point, and then it's truly over because there won't be anymore guesswork involved.  It will be in plain sight for the world to see.  We will have officially become a banana republic, courtesy of corrupt ass clowns in DC for decades.  Our biggest threat has always been DC, not any other part of the world.  We might get one last rush into the USD, but it will be short lived.  

In reply to by IH8OBAMA

CRM114 Decoherence Mon, 02/12/2018 - 08:06 Permalink

It's a tricky one - because there remains no currency alternative to the US dollar. The Euro is f#cked, Britain is overrun by gimmigrants, Russia's run by criminals and even all the Chinese are trying to get all their money out of China. The only sane option would be gold, but it's a rigged market so you have no guarantee of value. Plus, when the world starts melting down, the rich are going to need to live somewhere, and the US dollar remains the most desired currency.

The dollar doesn't have to be a good currency, it has to be less sh!t than all the other big ones, and it still is. It is likely to remain so until NO currency is worth having. That day may not be very far off.

In reply to by Decoherence

MK ULTRA Alpha Stan Smith Sun, 02/11/2018 - 23:33 Permalink

There's money for the Wall. The Democrats were bought off, they threw the Dreamers under the bus. That was one bribe, the other bribe was for a two year budget for the military build up.

A $1.2 trillion deficit is an emergency, this emergency will be used to purge the government of agencies. Seems like I'm dreaming, the government could be cut because of a budget emergency.

If Trump doesn't cut the size of the government, to cut the size of the deficit, then we are in trouble, the dollar will be worth much less. I don't see tax receipts increasing to the $500 billion needed to not make this a huge risk. I wonder what the Fed will do?

A budget emergency panic could include a social security reduction which is a nearly $1 trillion cash flow from government to social security elderly. A reduction of the $1 trillion pay out lowers the budget deficit. This is often a topic for cutting the deficit. Or there maybe a massive purge of federal workers and systems which aren't essential.

The government must be purged to save the nation, sounds like a good mantra.

Maybe the Trump strategy is a cheaper dollar. The whole budget spending plan was conceived and passed within 35 hours. The Democrats were bribed and the wheels were greased, it was politics, not economics. But we do get a Wall and early funding for the federal infrastructure matching funds.

In reply to by Stan Smith

Meat Hammer MK ULTRA Alpha Mon, 02/12/2018 - 00:19 Permalink

The whole budget spending plan was conceived and passed within 35 hours. The Democrats were bribed and the wheels were greased, it was politics, not economics.

It was scripted. Nothing is real. There aren’t two political parties...there is only one...the Deep State. They will all escape unscathed while we suffer.

Same as it ever was. Wake the fuck up.

In reply to by MK ULTRA Alpha