Dallas Fed Chief Says Bond Market Sending Pessimistic Signal on US Growth

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.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza