Former US Treasury Secretary Mnuchin: "US 10-Year Treasury Yield Could Rise to 3.5%"

Warning of Sharp Interest Rate Hike if Inflation Risk Persists... "Support Infrastructure Bill but Must Prevent Excessive Fiscal Spending"

Former U.S. Treasury Secretary Steven Mnuchin [Photo by AP News]

[Asia Economy Reporter Park Byung-hee] Former U.S. Treasury Secretary Steven Mnuchin said that if inflation risks persist, the yield on the 10-year U.S. Treasury bond could easily rise to 3.5%, Bloomberg reported on the 7th (local time).

At a virtual conference hosted by Bloomberg that day, former Treasury Secretary Mnuchin expressed concerns that increased government fiscal spending could raise inflation risks.

He voiced worries about the federal government's growing fiscal deficit and the debt ceiling continuing to be a political issue, pointing out that the Biden administration's excessive fiscal spending is also problematic. He noted that this ultimately raises inflation risks, increases Treasury yields, and burdens government finances. In other words, he highlighted a vicious cycle of expanded fiscal spending → inflation risk → rising Treasury yields → worsening government finances.

Recently, prices of energy raw materials such as crude oil, natural gas, and coal have risen sharply, causing U.S. Treasury yields to trend upward. The 10-year U.S. Treasury yield, which had fallen to around 1.1% in July, recently rose to the 1.5% range. Former Secretary Mnuchin warned that if inflation risks continue, Treasury yields could more than double from current levels.

He also said that the rise in crude oil prices is evidence of increasing inflationary pressure and that the central bank, the Federal Reserve (Fed), should normalize monetary policy.

On the same day, the U.S. Congress agreed to raise the federal government's debt ceiling from $28.4 trillion to $28.88 trillion, an increase of $480 billion. The newly agreed debt ceiling will apply until December 3, allowing the federal government to avoid a default crisis until early December.

Amid intense confrontation between Democrats and Republicans over raising the U.S. debt ceiling recently, six former U.S. Treasury Secretaries sent a letter to Congress last month urging an increase in the debt ceiling. Mnuchin did not join at that time. However, he stated that he supports resolving the debt ceiling issue to avoid a crisis.

In summary, while it is problematic that the federal government's debt continues to increase to the point where the debt ceiling remains a political issue, preventing a default is essential. He emphasized, "The federal government cannot be allowed to fall into default." He also said, "There needs to be a discussion about appropriate government debt and fiscal spending levels."

Former Secretary Mnuchin said it is positive that the U.S. economy is recovering and expressed support for the bipartisan infrastructure bill. However, he pointed out that if the infrastructure spending bill proposed by President Biden passes, the government's debt ratio could rise to a dangerous level. He remarked, "The Trump administration spent trillions of dollars because it had to respond to the emergency situation of the COVID-19 pandemic," adding, "That emergency situation no longer exists."

Mnuchin established the venture capital firm Liberty Strategic Capital this year. According to sources, Liberty Capital has attracted $2.5 billion in investments, mainly from sovereign wealth funds in the Middle East, including Saudi Arabia. Liberty plans to primarily invest in fintech, cybersecurity, financial services, and technology companies. Earlier in July, it announced a $200 million investment in the cybersecurity business sector.

This content was produced with the assistance of AI translation services.