There is increasing scepticism in the bond market that the Federal Reserve will be able to suppress medium to longer-term market interest rates. If investors cannot be persuaded that the likely record robust growth we are about to witness is “transitory” then Chairman Powell will at some point face a choice: lose credibility through tapering asset purchases and raising short rates earlier than previously guided (potentially killing the recovery); or increasing (or threatening to increase) asset purchases of Treasuries to re-establish control over the yield curve.
‘Will the “bond vigilantes” force Powell to do “whatever it takes”?’
08 Mar 2021
Posted by Barry Norris