The bond market is sending a pessimistic signal about the longer-term prospects of the U.S. economy, Dallas Federal Reserve President Robert Kaplan said Tuesday.
All eyes on Wall Street have been tuned into the rapid acceleration of the 10-year Treasury yield in recent weeks as a sign that inflation is looming.
However, Kaplan told the Economic Club of New York that there’s another important message coming, namely that the flattening of the so-called yield curve that has been taking place over the past several months is an indicator that the market sees growth slowing.
The message is that “prospects for future growth are somewhat sluggish or uncertain,” he said.
“The longer end is saying boy A) there’s a lot of money looking for safe assets,” Kaplan added. “But also it’s saying out-year growth is a little more uncertain.”
Shorter-duration government debt yields have been rising while the Fed is raising rates. But yields on longer-term notes and bonds have risen less rapidly, reflecting that caution about where things are headed.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.