What Does Mnuchin Say on Interest Rates?

Immediately following the election of Donald Trump to be the next President of the United States, bonds collapsed and yields jumped. Since the election, the ten year Treasury yield has surged.  There has been a corresponding downward move in bond prices, as represented here by the iShares 20+ Year Treasury Bond (TLT), which is down about 7%.

^TNX data by YCharts

Today's news that Steven Mnuchin would be Trump's pick for Treasury Secretary is part of the reason. 

"Mnuchin said interest rates are likely to stay low for a few years, but the recent rise in bond yields make sense. "We'll look at potentially extending maturity of the debt because eventually we're going to have higher interest rates."-CNBC

 Mnuchin: Interest rates to stay relatively low for a few years

 

What does this mean for investors?

Expect the yield curve to steepen as the US Treasury extends the duration of their debt offerings.  A steeper yield curve means higher net interest margins at banks. It also means that longer dated bonds will have a higher yield, but also a lower price. Investors in long-duration bonds could be in for a rude awakening.