Clarida will take questions at 10:25 am ET (1425 GMT)
- Fed's policy is a key determinant of the slope of the yield curve
- Yields reflect neutral rates and inflation expectations
- the message of this speech is that global integration of sovereign bond markets has important implications not only for how central banks extract relevant signals from observed yields on bonds issued by the domestic sovereign, but also for how central banks calibrate the transmission of policy and policy guidance to the real economy via the yields on long-maturity bonds that are relevant for saving, investment, and asset valuation.
- Full speech
To sum up, I believe that in extracting signal from noise from the Treasury yield curve, it is essential to incorporate the fact that observed yields in the United States and other major sovereign markets are determined in a global general equilibrium that is reflected, at least in part, in the global level of neutral policy rates and the state of longer-term global inflation expectations.Conditional on neutral policy rates and longer-term inflation expectations, the Federal Reserve and other major central banks can be thought of as calibrating and conducting the transmission of policy-be it through rates, forward guidance, or LSAPs-primarily through the slopes of their yield curves and much less so via their levels.
