January 15, 2015
A DEFLATIONARY EPOCH:
Falling 10-Year Yield Raises Doubts About Fed 2% Goal (Jon Hilsenrath, 1/15/15, WSJ)
In an interview with The Wall Street Journal Wednesday, Mr. Rosengren said falling 10-year Treasury yields, among several factors, were giving him pause about whether the Fed's own inflation expectations are realistic. Yields on 10-year notes have dropped below 2%. Presumably investors expect some return on investments in those bonds after accounting for inflation and taxes. A yield below 2% implies negative real returns. Either investors are so hungry for a safe haven asset that they're willing to accept no return over 10 years, or the market is signaling it doesn't believe the Fed will hit that 2% inflation goal any time soon.
Posted by Orrin Judd at January 15, 2015 4:24 PM
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