Carlyle Warns of Blurred Treasury, Fed Roles as Rate Cuts Loom

The Trump administration’s call for steep Federal Reserve interest-rate cuts, coupled with the prospect of higher short-term US debt issuance, risks disrupting the Treasury market and could end up driving longer-term borrowing costs higher, according to the Carlyle Group Inc.

“Bondholders want to be convinced that the Fed’s job is to preserve the real value of their principal. If instead they feel the Fed is more focused on government finance, you could see a bond selloff and higher term premiums,” Jason Thomas, the head of global research and investment strategy at Carlyle, said in an interview.

At issue is ...