{"id":205503,"date":"2021-03-18T19:48:00","date_gmt":"2021-03-18T16:48:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/the-fed-is-dovish-but-bond-yields-are-soaring-what-gives\/"},"modified":"2021-03-18T19:48:00","modified_gmt":"2021-03-18T16:48:00","slug":"the-fed-is-dovish-but-bond-yields-are-soaring-what-gives","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/the-fed-is-dovish-but-bond-yields-are-soaring-what-gives\/","title":{"rendered":"#\n  The Fed is dovish but bond yields are soaring. What gives?"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3f9ca982d8e\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3f9ca982d8e\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/the-fed-is-dovish-but-bond-yields-are-soaring-what-gives\/#10-year_Treasury_yield_flirts_with_175\" >10-year Treasury yield flirts with 1.75%<\/a><ul class='ez-toc-list-level-6' ><li class='ez-toc-heading-level-6'><ul class='ez-toc-list-level-6' ><li class='ez-toc-heading-level-6'><ul class='ez-toc-list-level-6' ><li class='ez-toc-heading-level-6'><ul class='ez-toc-list-level-6' ><li class='ez-toc-heading-level-6'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/the-fed-is-dovish-but-bond-yields-are-soaring-what-gives\/#Average_Inflation_Targeting\" >Average Inflation Targeting<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-6'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/the-fed-is-dovish-but-bond-yields-are-soaring-what-gives\/#Credibility\" >Credibility<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-6'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/buradabiliyorum.com\/en\/the-fed-is-dovish-but-bond-yields-are-soaring-what-gives\/#Big_in_Japan\" >Big in Japan?<\/a><\/li><\/ul><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/buradabiliyorum.com\/en\/the-fed-is-dovish-but-bond-yields-are-soaring-what-gives\/#Sunny_Oh\" >Sunny Oh<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong>#<br \/>\n  The Fed is dovish but bond yields are soaring. What gives?<br \/>\n<\/strong>&#8221;<\/p>\n<h2 class=\"article__subhead\" itemprop=\"alternativeHeadline\"><span class=\"ez-toc-section\" id=\"10-year_Treasury_yield_flirts_with_175\"><\/span>\n  10-year Treasury yield flirts with 1.75%<br \/>\n<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><\/p>\n<div class=\"column column--full article__content\">\n<div id=\"js-article__body\" class=\"article__body article-wrap at16-col16 barrons-article-wrap\" itemprop=\"articleBody\" data-sbid=\"WP-MKTW-0000203586\">\n<div class=\"barrons-article-ad-wrapper\">\n<div data-track=\"barrons-article-ad-wrap\" class=\"barrons-article-ad sticky_item\">\n<div class=\"barrons-main-article-ad-target sticky_target body_ad\" aria-hidden=\"true\"><\/div>\n<\/p><\/div>\n<\/p><\/div>\n<p>       Only a day after analysts had hailed the victory of the Federal Reserve over traders doubting the central bank\u2019s pledge to keep monetary policy easy for an extended period, bond yields rose sharply on Thursday.<\/p>\n<p> The 10-year Treasury note yield<br \/>\n        TMUBMUSD10Y,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.000%\" channel=\"\" class=\"\">1.728%<\/bg-quote><br \/>\n       was up nearly 10 basis points to around 1.74%, around its highest level since January 2020. Meanwhile, the 30-year bond yield<br \/>\n        TMUBMUSD30Y,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.000%\" channel=\"\" class=\"\">2.474%<\/bg-quote><br \/>\n       was knocking on the door of 2.5%, near its loftiest level since mid-2019. Bond prices move inversely to yields.<\/p>\n<div class=\"paywall\">\n       <strong>See<\/strong>: What we learned \u2014 and what we didn\u2019t \u2014 from Jerome Powell\u2019s press conference<\/p>\n<p>Investors are now scrambling to understand what has prompted the renewed volatility in a Treasury market that <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>eared to have calmed down after Wednesday\u2019s Fed meeting.<\/p>\n<p>Here are some of the theories being thrown around:<\/p>\n<h6><span class=\"ez-toc-section\" id=\"Average_Inflation_Targeting\"><\/span>Average Inflation Targeting<span class=\"ez-toc-section-end\"><\/span><\/h6>\n<p>After the meeting, market participants said Powell\u2019s dovish messaging was, in fact, responsible for higher long-term yields.<\/p>\n<p>At the postmeeting <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">news<\/a>-conference, Powell underlined the central bank would stick to its new framework of average inflation targeting, which would in theory only see the central bank contemplate less accommodative policy if inflation managed a sustained overshoot of 2%.<\/p>\n<p>By confirming the Fed\u2019s willingness to stand pat, even if inflation saw a temporary surge beyond 2%, investors may be raising the probability the economy will run hot in the next few years without having to worry about the central bank pulling away the market\u2019s punchbowl. In that scenario, long-term bond yields would have little protection against the risk of an inflationary surge.<\/p>\n<p>\u201cThis new inflation framework is destined for a steeper yield curve,\u201d said Matthew Miskin, co-chief investment strategist at John Hancock Investment Management, in an interview, referring to the spread between short-term and long-term yields.<\/p>\n<p>Yet markets were sending mixed messages. Break-even rates that show inflation expectations among holders of Treasury inflation-protected securities indicated investors did not see price pressures persisting over the longer term.<\/p>\n<div id=\"cx-membership-tile\"><\/div>\n<p>The 5-year break-even rate was around 30 basis points higher than the 10-year break-even rate. <\/p>\n<p>\u201cThe market is pricing in transitory inflation,\u201d said Frank Rybinski, chief macro strategist at Aegon Asset Management, in an interview.<\/p>\n<h6><span class=\"ez-toc-section\" id=\"Credibility\"><\/span>Credibility<span class=\"ez-toc-section-end\"><\/span><\/h6>\n<p>Amid the Treasury-market selloff, the sharpest rises were seen among medium-term maturities like the 5-year note<br \/>\n        TMUBMUSD05Y,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.000%\" channel=\"\" class=\"\">0.871%<\/bg-quote><br \/>\n       and 7-year note.<br \/>\n        TMUBMUSD07Y,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.000%\" channel=\"\" class=\"\">1.361%<\/bg-quote>\n      <\/p>\n<p>As a proxy for interest-rate expectations over the next few years, their surge could also have suggested investors may be doubting the central bank\u2019s pledge to keep policy accommodative for a sustained stretch of time. <\/p>\n<p>After all, analysts remarked there was only so much the central bank could do to fight investors\u2019 tendency to look ahead. <\/p>\n<p>Given the enormous uncertainty around inflation and economic growth as the economy fully reopens and stimulus makes its way into households\u2019 pockets, it was difficult to know where Fed policy would be in a year\u2019s time when the growth and inflation outlook was just as murky.<\/p>\n<p>\u201cThis cycle is so much, so fast, and so soon. A lot of things are getting distorted,\u201d said Rybinski.<\/p>\n<h6><span class=\"ez-toc-section\" id=\"Big_in_Japan\"><\/span>Big in Japan?<span class=\"ez-toc-section-end\"><\/span><\/h6>\n<p>Yet for all the speculation around whether the Fed was the trigger for the Treasury selloff on Thursday, some analysts were looking abroad for answers.<\/p>\n<p>\u201cGlobal central banks came out overnight with a more hawkish stance,\u201d said Miskin.<\/p>\n<p><a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.reuters.com\/article\/japan-economy-boj\/update-2-boj-to-widen-band-around-long-term-rate-target-on-friday-nikkei-idUSL4N2LG0YY\" class=\"icon none\">The Bank of Japan<\/a> during its two-day meeting was looking to adjust its yield-curve control policy where it keeps long-term interest rates capped but allows them to trade in a tight range, according to a report from Japanese financial newspaper Nikkei.<\/p>\n<p>The BOJ\u2019s measures would allow the 10-year Japanese government bond yield to move in a range between 0.25% and negative 0.25%, compared with the current range of 0.20% and negative 0.20%.<\/p>\n<p>BofA Global strategists said the tweak would allow \u201cfurther back-end steepening of the [Japanese government bond] curve, alleviating some of the pressure on financial institutions, and making the\u00a0BoJ\u2019s\u00a0easing program more sustainable in the long run.<\/p>\n<p>Soon after the report, the 10-year Japanese government bond yield<br \/>\n        TMBMKJP-10Y,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.000%\" channel=\"\" class=\"\">0.106%<\/bg-quote><br \/>\n       jumped, moving from an intraday low of 0.085% to a high of 0.122%. The 10-year has since steadied at 0.107%, according to Tradeweb data.<\/p>\n<p>As an anchor of bond yields across the world, analysts said rising rates in Japan can be amplified into broader weakness in Europe and U.S. bonds as Japanese investors reassess the gains from holding domestic debt over their overseas peers.<\/p>\n<p>Meanwhile, the jump in Treasury yields was blamed for renewed pressure on growth-oriented stocks, which stand to suffer most from higher rates due to lofty valuations. The tech-heavy Nasdaq Composite COMP slumped more than 1% in Thursday trade, while the more cyclically oriented Dow Jones Industrial Average DJIA traded in record territory and the S&amp;P 500 SPX saw a modest pullback.<\/p>\n<p><strong>See: <\/strong>\u2018There will be no peace\u2019 until 10-year Treasury yield hits 2%, strategist says<\/p><\/div>\n<\/div><\/div>\n<p><\/p>\n<div class=\"byline article__byline\">\n<p>      <span>By<\/span><\/p>\n<div class=\"author  hasMenu\" data-scrim='{\"type\":\"author\",\"header\":\"Sunny Oh\",\"subhead\":\"The Wall Street Journal\",\"list\":[]}' itemscope itemprop=\"author\" itemtype=\"http:\/\/schema.org\/Person\">\n<h4 itemprop=\"name\"><span class=\"ez-toc-section\" id=\"Sunny_Oh\"><\/span>Sunny Oh<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/p><\/div>\n<\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more News articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/news\/\" target=\"_blank\" rel=\"noopener\">News category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"http:\/\/www.marketwatch.com\/news\/story.asp?guid=%7B21005575-02D4-D4B5-4572-D31B426BDAE7%7D&#038;siteid=rss&#038;rss=1\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;# The Fed is dovish but bond yields are soaring. What gives? &#8221; 10-year Treasury yield flirts with 1.75% Only a day after analysts had hailed the victory of the Federal Reserve over traders doubting the central bank\u2019s pledge to keep monetary policy easy for an extended period, bond yields rose sharply on Thursday. The&#8230;<\/p>\n","protected":false},"author":1,"featured_media":205504,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"","fifu_image_alt":"","footnotes":""},"categories":[70897],"tags":[],"class_list":["post-205503","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/205503","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=205503"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/205503\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/205504"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=205503"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=205503"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=205503"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}