Edward Conard

Top Ten New York Times Bestselling Author

  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
Upside of Inequality Oxford Unintended Consequences

AI Summary. For three decades the 10-year Treasury yield fell almost entirely on the handful of days around Federal Reserve meetings; since 2022 it has risen roughly 4 percentage points with almost none of that on Fed days. Rate moves were largely priced in advance, with inflation and jobs surprises, Treasury supply and a rising term premium driving the increase.

Torsten Sløk Apollo
Date Posted:

Between 1989 and 2022, nearly all moves in the 10-year yield came on FOMC days. Its cumulative 400bp rise since August 2022 was due to inter-meeting increases. Fed moves were predictable from data releases, which likely also carried news about the long end.

Does the Fed still drive long-term interest rates?

Core argument: The 10-year Treasury yield has risen roughly four percentage points since 2022, but almost none of that increase occurred on Federal Reserve meeting days, breaking a 30-year pattern in which the yield fell almost entirely around FOMC meetings.

For 30 years, the 10-year Treasury yield fell almost entirely on the handful of days around Fed meetings, and did essentially nothing the rest of the time. That stopped in 2022 after the Fed began to raise interest rates. The 10-year has since risen roughly four percentage points, but almost none of that came on Fed days. The reason is that each hike was largely priced by the time the Committee met, so the FOMC announcement and press conference carried little news for the long end, and the move higher instead came from higher-than-expected CPI prints, stronger payrolls, increasing Treasury supply and a rising term premium, none of which sit on the FOMC calendar.

Takeaways by Macro Roundup® AI

  1. The 10-year Treasury yield has risen roughly four percentage points since 2022, but almost none of that increase occurred on Federal Reserve meeting days, breaking a 30-year pattern in which the yield fell almost entirely around FOMC meetings.
  2. Each Fed hike was largely priced by the time the Committee met, leaving the FOMC announcement and press conference with little news for the long end.
  3. Higher-than-expected CPI prints, stronger payrolls, increasing Treasury supply and a rising term premium drove the 10-year yield higher, none of which sit on the FOMC calendar.

Related Articles:

  • The Fed and the Secular Decline in Interest Rates — The authors find that the long-run decline in US Treasury yields since 1980 is fully accounted for by movements in a narrow window around Federal Reserve policy meetings, while yield changes outside that window prove transitory. They suggest the Federal Reserve conveys information to markets about the long-run level of interest rates.
  • What Are US Treasury Markets Really Telling Us? Part I — Comparing US Treasury yields to AAA corporate bonds combined with credit default swap insurance creates a synthetic Treasury, and the resulting spread — the convenience yield investors give up for safety and liquidity — has disappeared, suggesting investors are indifferent between the two on safety and liquidity. The author argues this is bad news for US taxpayers.
  • America’s Risky Debt: What Markets See That Policymakers Don’t — Two market-based measures suggest the safety premium investors pay to hold US Treasuries has compressed toward zero and at times reversed: the spread between top-rated corporate bonds and Treasuries after stripping out default risk, and the gap between currency-hedged foreign G10 government yields and Treasury yields at the same maturity, where longer-maturity comparisons now favor foreign bonds.
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