US decisions likely to decide between more inflation or deflation
Hunt attributes the improving outlook since November last year to the US Federal Reserve conducting “QE by stealth,” or printing money.
Last year, when the US government started to issue more debt, the bond markets suffered from indigestion and bond yields rose, Hunt told an investment forum in Wellington hosted by Nikko Asset Management.
US 10-year Treasuries reached a 16-year high just below 5% in mid-October but have since dropped to about 4.23%.
Because of concerns the US government mightn't be able to continue funding its fiscal deficit, the Fed then took action in the repo markets to flood the system with money and that's what produced the ensuing rally in both bonds and equities, Hunt said.
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