Nominal GDP and the Bond Market Selloff
Ten-year Treasury yields are back above 3% and our forecast is for yields to rise further through 2019. We have highlighted a number of reasons why we expect higher yields: faster-than-expected rate hikes, a larger-than-expected fiscal deficit, and the unwinding of the Fed’s balance sheet. But one of the most powerful economic forces could be the pickup in nominal GDP growth. Ten-year Treasury yields and nominal GDP growth both trended higher until the beginning of the 1980s and then both series trended lower with nominal GDP growth exhibiting much greater cyclical amplitudes than the 10-year yield. Are the series related or is this just a case of spurious correlation?
Please see the attached note for more.
RDQ Economics provides global macroeconomic consulting services with an emphasis on U.S. economic fundamentals and monetary policy.
Our views are driven by consistent application of classical economic and monetary principles and has generated superior anticipation of changes in the stance of monetary policy and of movements in economic growth and inflation.
The founders of RDQ Economics, John Ryding and Conrad DeQuadros, have a combined experience of 26 years on Wall Street, 12 years of experience in central banking at the Federal Reserve and the Bank of England and nine years in the independent research space. John and Conrad have worked closely with fixed income, foreign exchange, and equity traders and portfolio managers, which has enabled their analysis and advice to be tailored to a clientele that is focused on trading and investment decisions.
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