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Fed Chair Warsh may be misreading an important bond market signal
['Executive Professor Of Finance', 'Texas A M University', 'Jill Cetina Is An Executive Professor Of Finance At Texas A M University. She Is A Former Associate Managing Director Of U.S. Bank Ratings At...', 'Staff Writer']
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Key insight: The Fed chair attributed recent rising bond yields to a strong economy.
The Fed chair attributed recent rising bond yields to a strong economy.
Warsh appears unaware that his own statements about the Fed's five recently formed policy review task forces may be influencing the U.S. bond market.
If such a premium emerged, the price of TIPS would be expected to fall and TIPS' real yields would rise.
Thus, the recent sharp rise in long-dated U.S. bond yields undoubtedly reflects more than expectations for the U.S. economy.