Bond traders on collision course with Fed over longer-term view

Bloomberg/Benjamin Purvis and Ye Xie/8-6-2022

“The wild ride that bond traders have been on is far from over as market expectations for the longer-term path of Federal Reserve monetary policy appear at odds with the central bank’s own view.”

USAGOLD note: The Fed, in short, wants the bond market to believe it is sincere about tightening. The bond market, in the main, questions that sincerity. Beyond the psychological fun and games, the markets recognize a fundamental reality: The fed funds rate is nowhere near where it needs to be to contain the current inflation rate. (See “Indefensible neutral rate strategy” above.)

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