Will Fed Underwrite Another Stimulus?
- Fed supports additional fiscal spending despite widening budget deficit.
- Position is a reversal of Fed’s stance in the 1980s, 1990s.
- Fresh stimulus spending could raise budget deficit by up to 30% of GDP.
- Will Fed absorb new stimulus debt with more quantitative easing?
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Could Stimulus Raise Bond Yields?
- Stimulus package could impact bond yields, gold, and stocks.
- If Fed does not absorb large chunk of stimulus debt, yields could rise.
- Higher bond yields could lead investors away from equities, gold.
- Implied volatility on long-term bonds has risen from recent lows.
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