Why Treasuries Became Risky Again
Summary
Odd Lots hosts Tracy Alloway and Joe Weisenthal discuss soaring 30-year Treasury yields with guest Carolyn Fliger, an associate professor at the University of Chicago. Fliger explains her research on the "perceived policy reaction function," showing how markets adjust expectations of Fed behavior based on actual actions rather than just communication. The conversation explores why bonds have become riskier and more correlated with stocks, driving up yields, and examines the interplay between monetary policy credibility, geopolitical shifts, and the potential for a financial hegemonic transi…
Topics discussed
Sponsorships and Odd Lots Live Chicago announcement
30-year Treasury yield at highest level since 2002
Guest intro: Carolyn and bond market feedback loops
Defining the perceived policy reaction function
Methodology: Measuring market expectations via forecasters
Dispersion of views and the 2011 forward guidance example
2020-2021: Flat reaction function and 'transitory' inflation
Bloomberg Tech Minute: E-rickshaws in India
Rules vs. Discretion and data-dependent policy
Bond risks: Pre-2000 stock-like vs. post-2000 safe
Inflation risk and the shift in Treasury bond characteristics
Luck vs. Policy: Comparing 1980s and recent Fed actions
Pricing bond risks: Co-movement with stocks and yields
Bloomberg Money promo and E-rickshaw microeconomy
Inflation expectations stability and uncertainty
Geopolitics, war, and the link to dollar hegemony
Historical link between military strength and borrowing costs
US vs. China bond yields and reflexivity
Bond supply, fiscal deficits, and investor positioning
Closing remarks and show plugs
Listen ad-free on Castria