Poor communication by the U.S. Federal Reserve is leading to higher bond market volatility, said leading economist and fixed-income expert Mohamed El-Erian in a Twitter Spaces interview Nov. 2.
In an interview with Pensions & Investments Editor-in-Chief Jennifer Ablan, El-Erian noted that the last day or so in the U.S. bond market has been "good, because rates (in the Treasury market) have collapsed. But these sorts of moves should not be happening in a benchmark market." El-Erian is also president of Queens College, University of Cambridge.
Why has there been increased volatility in the U.S. Treasury bill and bond market?
"Inconsistent communication from the Fed," El-Erian said. At press conferences, Fed Chair Jerome H. Powell "doesn't stick to the script. He says things and the market gets carried away. At the Economic Club of New York, the market was calm after his prepared remarks. Then he started talking, and next thing we saw yields traded from 4.89% to 4.99% based on his comments."El-Erian also cited recent research that found the U.S. bond market's volatility is four times higher than under previous Federal Reserve leadership. "We've lost our anchors," he said. "We're operating in a world without three anchors of predictable global growth, credible policies and supportive technicals. That's why conventional wisdom has been all over the place."