Mnuchin: Trump respects Fed but likes low interest rates

US stocks have plunged to their worst loss in eight months

Last week's jump in yields followed strong USA data but many analysts have been anticipating dynamics in the bond market to change due to expectations that central banks in Europe and Japan will soon phase out bond-buying programmes.

President Donald Trump blamed the Federal Reserve for Wednesday's 832-point stock dive. The average yield on the 100 largest taxable US money-market mutual funds averaged 1.95 percent this week, according to Crane Data. The investor is predicting a "very bad" bear market ahead. When a bond's price falls, its yield rises, and the 30-year Treasury yield rose above 3.40 percent at one point October 10, up from 2.89 percent a year ago. Unemployment in September fell to its lowest rate in almost half a century.

The yields of inflation-protected bonds have moved mostly in lock step with traditional bonds in recent weeks, suggesting that traders haven't become more anxious about inflation.

Add it all up, and it means the world's most savvy investors are betting that the US economy will keep growing at a healthy clip, without inflation emerging, but that the Fed will have to keep raising rates well above current levels in order to prevent that inflation.

"He is an individual that really understands the plumbing of the United States and global financial systems and one example is the reforms that are going underway on London Interbank Offered Rate, or Libor, for which he is one of the main sponsors", said Carney.

That dynamic played out in the market carnage this week.

Bank of England governor Mark Carney also joined in, saying: "I think the sanest way to answer that question is to associate myself entirely with Kganyago's answer". US consumer prices rose only slightly in September.

Economists generally view the recent rate increases as a natural response to improved growth. Since 1914, when the Fed began operations, the value of the dollar has declined to the point that it is worth less today than what nickel was worth back then. When a bond is paying more in interest, investors aren't as willing to pay high prices for stocks, which are riskier investments.

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The last time average mortgage rates were near the 5 percent level was in April 2011.

Mnuchin said Fed Chairman Jay Powell was doing a good job and that he understands the regulatory environment. "Because bond prices go down when yields go up so, wait until you can get a healthier return".

"Actually it's a correction that we have been waiting for, for a long time", he continued.

Overall, the Trump administration needs to take action to create less inflation on the movement of money, the movement of people, and the movement of products and services.

"Diversification is like a shock absorber to weather the storms in the market", Jeanne Thompson, senior vice president at Fidelity Workplace Investing, told CBS MoneyWatch. That's good news for savers and investors looking for more income.

Numerous biggest U.S. names fell hard in Wednesday's session, with Apple, Boeing and Facebook all slumping more than four percent and Amazon, Nike and Microsoft shedding more than five percent. At age 60, the picture changes to 40 percent bonds, 7 percent cash and a mix of equities.

"The big difference between now and a year ago is tax reform", Tannenbaum said.

In short, it's hard to see in Powell's speech many signs the Fed is poised to deviate from its steady course toward normalization so as to crush inflation at any sign of labour market tightening or rising wages.

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