Is this time different?
As the new Federal Reserve chair nominee is about to be announced, market expectations for its easing policies are rising. However, since 1970, U.S. Treasury yields typically rise within three months after the Federal Reserve chair nomination. Bank of America’s Hartnett points out that the current volatility of U.S. Treasuries is at a four-year low, and the market expects the new chair will not push the 30-year Treasury yield above 5%, as QE/YCC measures will stabilize fixed income prices
With the new Federal Reserve chair nominee "on the horizon," market expectations for a dovish stance from the new chair have been high, but historical data presents a different view.
According to Bank of America Hartnett's statistics, since 1970, in the three months following the seven nominations of Federal Reserve chairs (Burns, Miller, Volcker, Greenspan, Bernanke, Yellen, Powell), U.S. Treasury yields have risen (the 2-year Treasury yield increased by 65 basis points, and the 10-year Treasury yield increased by 49 basis points).
Hartnett believes that since the volatility of U.S. Treasuries, as measured by the MOVE index, is at a four-year low, it indicates that the market believes the new Federal Reserve chair in 2026 will not push the 30-year U.S. Treasury yield above the "safe-haven" level of 5%, as QE/YCC measures will "fix" fixed-income prices.
