Two important political decisions were made this week, and both have implications for interest rates and fiscal policy. The first was the midterm elections. With the Democrats winning control of Congress, gridlock likely will be the order of the day. There should also be more constraint and oversight on fiscal spending, helping provide a little more clarity on the “how much” question. The second was the release of the QRA (Quarterly Refunding Announcement), which should help determine the “how it’s funded” question. With no small supply of ink having already been spilt on the midterms, in this Economics Weekly, Richard de Chazal focuses on the news from the QRA, which is increasingly becoming the Treasury’s equivalent of an FOMC meeting—an event where subtle changes in language and policy settings can materially affect yields, liquidity, and financial conditions.
