Hayes explains that the Fed is balancing its policies to control bond yields. He believes the 10-year US Treasury yield must stay below 5% to prevent market volatility. Additionally, Treasury Secretary Janet Yellen’s “extraordinary measures” to fund the government, amid the debt ceiling debate, play a critical role in liquidity management. Hayes anticipates a potential technical default or government shutdown by May or June unless Congress raises the debt ceiling.
The Treasury’s actions, such as spending from its $722 billion checking account balance, could inject liquidity, while issuing de