Larry Kudlow, President Donald Trump’s chief economic adviser, told CNBC Friday that he believed the recent decline in US bond yields did not reflect market fundamentals but rather a transient leak to safer assets following the coronavirus in Asia.
Asked by David Faber of CNBC how he interprets a new historic low on the 30-year Treasury bond, Kudlow said he must have thought it was “a safety leak”.
“I just think, in general, that I would be very careful in putting too much emphasis on what bond rates do, what interest rates do. Or even in the short term, the stock market,” he said. -he declares. “I think you have a lot of mood swings here and I don’t think it reflects the fundamentals.”
Kudlow’s comments came as the benchmark 30-year Treasury bond yield fell to an all-time low below 1.9% and the Dow Jones Industrial Average fell 285 points, just under 1%.
Although traders largely blamed coronavirus for Friday’s risk hub, some have suggested that the record 30-year bond level represents a longer-term view that economic growth may slow and the Federal Reserve may not be equipped to remedy a slowdown.
“The fixed income market, generally the biggest pessimist in the world, tends to look far into the future when pricing the current market,” wrote Raymond James rate strategist Kevin Giddis. “He sees from afar the negative effects the virus could have on the US economy, which could force the Fed to step in and shout.”
But Kudlow countered that the sharp increases in the stock market in the past 12 months are a sign of “business and consumer confidence” and that business conditions could remain healthy throughout 2020.
“During the three years of policy of lower tax rates, deregulation, independent energy and better trade deals to open up an export boom, we have achieved an average growth rate of 2.5%” , did he declare. “It is significantly better than the previous administration. It is also much better than what the CBO had planned.”
“America is working and there is a blue collar boom,” he said. “It’s a fundamentally very healthy economy.”
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