John Williams on Rates and the Yield Curve
John Williams, the new President of the NY Fed, had a huge impact on the bond market this week, jawboning 10-year yields up more than 10bp from 2.80% to more than 2.93%. Williams’ world view has not changed just because he got a new job. It is still profoundly pessimistic. He believes the Fed must soon slow the economy to less than 1% growth to increase the number of unemployed by 1.5 million so that no one gets a decent raise. For their own good, of course. The bad news is most of the FOMC thinks this way. The good news is Williams is open minded. If productivity accelerates, or traders flash a recession warning by inverting the yield curve, he will listen. For now, however, it is important to understand what he has to say.
Plus "The Week Ahead," a preview of next week’s potentially market-moving events.