We recently took a look at interest rates, inflation and the fiscal deficit. Download a high resolution PDF with key takeaways.
Key Takeaways
- Relative to prior major rate cutting cycles, the 10-year Treasury yield remains elevated since the Fed’s first interest rate cut of the current cycle in September. In fact, 2025 marks the first time in eighteen years that the US Treasury curve began the year above 4.00% across the entire term structure.
- The bond market reaction to inflation and jobs data, FOMC minutes, and fading rate cut expectations suggest that the risk of inflation holding steady or even picking up again may have been underestimated.
- The fiscal deficit remains a key issue - 2024 saw the largest U.S. fiscal deficit in a non-crisis or non-pandemic year on record and the Congressional Budget Office estimates further deficit increases in 2025. Additionally, with interest rates still elevated, net interest payments are expected to continue to increase.
- The Trump administration appears focused on the challenging task of bolstering economic growth while at the same time reducing the deficit. The most critical element of this endeavour will be curtailing the deficit while keeping longer-term yields contained to not disrupt economic expansion.
The opinions and analyses expressed in this presentation are based on Curi RMB Capital, LLC’s (“Curi RMB Capital”) research and professional experience are expressed as of the date of our mailing of this presentation. Certain information expressed represents an assessment at a specific point in time and is not intended to be a forecast or guarantee of future results, nor is it intended to speak to any future time periods. Curi RMB Capital makes no warranty or representation, express or implied, nor does Curi RMB Capital accept any liability, with respect to the information and data set forth herein, and Curi RMB Capital specifically disclaims any duty to update any of the information and data contained in this presentation. The information and data in this presentation does not constitute legal, tax, accounting, investment or other professional advice. An investment cannot be made directly in an index. The index data assumes reinvestment of all income and does not bear fees, taxes, or transaction costs.
