Jenny Paris, Columnist

Bond Traders Are Reading the Federal Reserve Wrong Again

Rushing to hedge for a recession that has yet to arrive overlooks the fact that the battle against inflation is far from over.

June 24, 2022 at 3:30 PM UTC

By Jenny Paris

Jenny Paris is executive editor at Bloomberg News for global bond, currency and emerging markets. She has previously worked at the Wall Street Journal and Dow Jones Newswires covering the euro zone crisis and as a managing editor for Asia equity markets.

The Federal Reserve and Chair Jerome Powell may disappoint the bond market again.
Photographer: Eric Lee/Bloomberg via Getty Images

Provide news feedback or report an error

Site feedback:

Take our Survey

This article is for subscribers only.

It may be a cliché, but the phrase “don’t fight the Fed” worked well for investors during the long period when the US central bank was suppressing interest rates and seeking to boost asset prices. This year, not so much.

The bond market had its worst day in almost four decades after the Federal Reserve signaled recently that it would raise its benchmark interest rate by 75 basis points, only weeks after Chair Jerome Powell convinced traders that a move of that magnitude wasn’t in the cards. Fast-forward and bonds are now rallying as recession fears fuel bets on rate cuts only a year from now! But like a couple of weeks ago, traders may be in for another costly hawkish surprise.