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You know how the shrinking spread between yields on government and corporate bonds is a sign of optimism about the economy? Well, how high is too high? This week, the brokerage T. Rowe Price predicted that 10-year Treasury yields could top 6%, which hasn’t happened in nearly a quarter century.
Yields could keep rising in 2025 for a few reasons: Additional tax cuts are likely under the incoming Donald Trump administration, which could increase the budget deficit, forcing the Treasury Department to issue a whole bunch of new bonds and driving up rates in the process.
Additional tariffs are also possible, which could push up inflation and alongside it — you guessed it — interest rates. Plus, there’s the threat of mass deportations.
“Those all smell a bit inflationary to us,” said Collin Martin, a director and fixed income strategist at Charles Schwab, which is a Marketplace underwriter.
He said tax cuts can be inflationary because they stimulate consumer spending. And if a huge number of immigrants are deported, the labor force shrinks.
“If we lose some of those workers, we need to find people to fill tho …
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