John Taylor Ignores the Other Guy's Rule With Curve Forecast

Pimco's Mather Says Inflation-Linked Bonds Still Cheap

John Taylor is calling for an end to one of the most popular trades in the U.S. bond market even as the Stanford University economics professor sharing the same name is seen as one of the leading candidates to be the next Federal Reserve chairman.

John R. Taylor, former head of the world’s biggest currency hedge fund, says his analysis of statistical patterns concludes that the flattening of the yield curve is over. Investors have driven the difference between the yields on two- and 10-year notes close to the narrowest level since 2007 amid expectations inflation will remain benign.

Stanford’s John B. Taylor is best known for the monetary-policy rule that bears his name and dictates that the fed funds rate should be much higher than it is now (such a move is likely to add more juice to curve flattening).

“Cycles tell us that the curve flattening is either over NOW or will be ending in two weeks - maybe after the ECB meeting (?),” Taylor said Thursday in his newsletter Taylor Global Vision, which costs $25,000 a year. “The cycle numbers are really there.”

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