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But broader acceptance of the idea that the neutral rate — known in economics circles as “r-star” — has gone up would have adverse implications for a #Treasury_market nursing back-to-back down years. A higher neutral rate should raise yields across the curve, led by rising
short-term rates along with some restoration of a term premium for owning longer-dated Treasuries. “The 2 percentage point drop in estimates of r* following the global financial crisis rests on shaky ground,” Matthew Raskin, the head of US rates strategy at Deutsche Bank
#Securities in New York, wrote in a Feb. 10 note. “If growth and the labor market remain resilient,” then investors can expect Fed officials to upgrade their estimates, which “would have big implications for longer-run rates,” he said. But if interest rates were to revert to the
