Christopher Waller, governor of the Federal Reserve, said that the soaring yield of US treasury bond bonds in recent weeks was no different from an "earthquake" in the bond market.
On Tuesday, he said in a speech on economic data that since the end of July, the yield of 10-year US treasury bond has climbed more than 100 basis points, which attracted "a lot of attention". Although the yield has fallen back in the past few days, the yield of the 10-year US treasury bond bond fell to 4.55%, but it exceeded 5% for the first time since 2007 last month.
Since the end of July, this number has risen by nearly one percentage point. From the perspective of the central bank and financial markets, this is an earthquake. Therefore, there is great attention to this number, and there is also a lot of speculation about what drives this interest rate. I don't want to talk too much. But this is one of the things people are considering, "he said.
In fact, bond investors are considering whether US bond yields will regain their upward momentum. The increase in government borrowing has boosted expectations for future interest rate hikes, and the Federal Reserve has opened the door for further rate hikes in the coming months. However, Waller pointed out that high yields have already tightened the financial environment and may eliminate some of the driving forces for further interest rate hikes.
Krishna Guha, Vice Chairman of Evercore, an independent investment banking consulting firm, wrote in a report: "His (Waller) remarks need to be understood in context - they are not part of policy discussions, and if so, there may be more hedging. However, it seems reasonable to dispel the impression that all the tightening of the yield driven financial environment last week has come to an end
On the other hand, Waller also said that US prices may not fall back to the level before the COVID-19 epidemic.
He believes that the demand for real-time economic data from the Federal Reserve is increasing. He warned that if the federal government halts, the Federal Reserve will not be able to obtain any data to evaluate the US economy and decide on monetary policy.
Finally, Waller also stated that if interest rate hikes cause instability, the Federal Reserve has other tools.