The Bond Market Isn’t Making Sense
A lot of hope has been invested on the back of very little evidence that the Fed is turning dovish. Also, Bitcoin bubbles and Ray Dalio’s lessons learned.
Bond traders are misjudging the cost of money.
Photographer: Bloomberg
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I don’t think last week’s dose of Fedspeak moved the needle much on the likely course of Federal Reserve interest-rate hikes next year. Barring a sharper slowdown in the U.S. economy than most forecasters expect, we should brace for the federal funds target rate to be about a percentage point higher by the end of next year than it is now. On that basis, it looks as though the bond market has stopped making sense. The benchmark 10-year Treasury note yield is at its lowest since the first week of October, just before shooting higher: