Bond News: Market Contradicts Fed

Bond Traders Are Piling Into a Fed-Proof Bet

  • Flattest U.S. yield curve since 2007 may just keep flattening
  • All potential Fed leaders seen as more hawkish than the market


Traders in the $14.2 trillion Treasuries market have found a way to avoid fighting the Federal Reserve, or at least its imminent leadership change.

 Whether President Donald Trump nominates Fed Board Governor Jerome Powell, Stanford University economist John Taylor or even Chair Janet Yellen to lead the central bank, one trade is foolproof in the eyes of many on Wall Street: betting on a flatter U.S. yield curve. By most measures, the spread between short- and long-term Treasuries is close to the slimmest in a decade as the Fed raises rates in the face of tame inflation.