Mohamed A. El-Erian , Columnist

The Fed Pivot That Turbulent Treasuries Need

The world’s most-important central bank has ended up fueling volatility in the US government bond market. Here’s a recipe for change.

October 23, 2023 at 9:00 AM UTC

By Mohamed A. El-Erian

Mohamed A. El-Erian is a Bloomberg Opinion columnist. A former chief executive officer of Pimco, he is president of Queens’ College, Cambridge; chief economic adviser at Allianz SE; and chair of Gramercy Fund Management. He is author of “The Only Game in Town.”

Markets have been whipped around by rising Treasury yields. — Markets have been whipped around by rising Treasury yields.
Photographer: Michael Nagle/Bloomberg

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Greater stability in US Treasuries is needed for the smooth functioning of other segments of the financial market, housing and the economy more broadly, both in America and beyond. Such stability is unlikely to be anchored anytime soon by either clarity about economic prospects or an abundance of volatility-repressing financial flows. What is needed is a policy anchor that, at this stage, must necessarily have a significant monetary policy component.

To say that the government bond market has been unusually unstable would be an understatement. Recent weeks have seen eye-popping intra-day moves in yields, uncertain auctions, and periodic concerns about liquidity and financial stability.