U.S. Treasuries Divide Supports Bullard Warning Fed May Get Behind Curve

Short-term Treasuries are no longer the losers of the bond market, backing James Bullard’s warning the Federal Reserve may fall behind in its efforts to cap inflation.

The president of the Fed Bank of St. Louis said in March the central bank risks being “behind the curve” on inflation if it doesn’t raise its benchmark interest rate from near zero soon. Under the Fed’s rotation system, Bullard is scheduled to vote on monetary policy next year.

Shorter-maturity notes, those most influenced by what the central bank does with its main interest rate, are gaining this month in a sign investors are postponing forecasts for an increase. Longer-term securities are falling as Fed efforts to spur the economy drive the outlook for inflation higher.