Economic Information Daily, June 23 — The U.S. Treasury’s $69 billion 2-year note auction on Tuesday (June 22) yielded a high rate of 4.787%, the highest since May 2024, above the pre-auction trading level of 4.785% at the time of the bidding deadline, indicating demand was slightly below expectations. Howard Marks, co-founder of Oaktree Capital Management, said that if the government does not address the persistently widening fiscal deficit, attempts to suppress long-term borrowing costs are unlikely to succeed.

   Marks said: 'Forcing down interest rates through bond buying is like a doctor putting ice packs on a feverish patient. The ice pack might lower the patient’s temperature, but unless the underlying cause of the fever is treated, the patient is unlikely to truly recover.'

   He pointed out that persistent inflation, rising government debt, and increasing capital demands—including trillions of dollars in investments in the field of artificial intelligence—are fundamental reasons pushing up borrowing costs. He also noted that the U.S. fiscal deficit is about 6% of GDP, 'unusually high.'

   Marks said: 'You can’t ignore economic laws and still expect a good outcome in the end.' He believes the only solution is to change behavior and advocates increasing government revenue as a share of GDP by raising income tax rates. (yc)