Cabana Warns Treasury Selloff Could Return Without Clearer Fed Inflation Plan
Mark Cabana, head of U.S. rates strategy at Bank of America Global Research, said the selloff in U.S. Treasuries could resume if the Federal Reserve does not do a better job explaining how it plans to achieve its 2% inflation target. The long-end bond selloff last Wednesday, which pushed yields to nearly a 20-year high, was a “textbook inflation-credibility shock,” Cabana said. That day, Fed Chair Kevin Warsh failed to explain to investors how the central bank would bring price increases under control during a news conference. “It’s great to have firm resolve to achieve 2% inflation, but unless you tell us how you’re going to do it, we’re not going to believe you,” Cabana said in an interview with Bloomberg Television. “And you can’t fool the bond market—it will see through you.”
The long-end bond selloff last Wednesday, which pushed yields to nearly a 20-year high, was a “textbook inflation-credibility shock,” Cabana said. That day, Fed Chair Kevin Warsh failed to explain to investors how the central bank would bring price increases under control during a news conference.
“It’s great to have firm resolve to achieve 2% inflation, but unless you tell us how you’re going to do it, we’re not going to believe you,” Cabana said in an interview with Bloomberg Television. “And you can’t fool the bond market—it will see through you.”