Caroline Baum: No, the Fed and bond market aren’t interchangeable

All it took was a modest rise in long-term Treasury yields, part of a global bond market sell-off last week, to trigger the usual fallacious thinking on what the bond market can and cannot do.

“Higher bond yields could be self-correcting, pushing up long-term borrowing costs for consumers and businesses and undercutting growth,” according to a June 29 story in the Wall Street Journal, attributing the insights to one Erik Weisman, global bond portfolio manager at MFS Investment

This is part and parcel of the idea that the bond market can do the central bank’s work; that their roles are interchangeable when it comes to steering the economy and managing inflation.

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