Forward-Looking Markets Should Not React To Lagging Data
bondeconomics.substack.com
I ran into an amusing article by a certain mainstream economist, but I have used up my quota for dunking on him in Q2, so I will just make a more generic point related to an underlying issue that often comes up in discussions of the bond market by people who are not fixed income strategists. The argument is straightforward: the “common sense” belief that a jump in measured inflation will cause a rise in bond yields is incorrect. The reason is straightforward: the bond markets are forward-looking, while measured inflation is a backwards-looking measure (and is normally considered a lagging economic indicator).
Forward-Looking Markets Should Not React To Lagging Data
Forward-Looking Markets Should Not React To…
Forward-Looking Markets Should Not React To Lagging Data
I ran into an amusing article by a certain mainstream economist, but I have used up my quota for dunking on him in Q2, so I will just make a more generic point related to an underlying issue that often comes up in discussions of the bond market by people who are not fixed income strategists. The argument is straightforward: the “common sense” belief that a jump in measured inflation will cause a rise in bond yields is incorrect. The reason is straightforward: the bond markets are forward-looking, while measured inflation is a backwards-looking measure (and is normally considered a lagging economic indicator).