Following Fed Pres Evans opinion that the backup in treasury yields is due to “better economic data,” Fed Pres Bullard believes it’s a “little of both” the economic outlook and inflation prospects and Fed Pres Fisher believes that supply (fed by government deficits) is the main factor. It’s no coincidence that one week before the next FOMC meeting, we get to hear from some Fed members as they lay the groundwork for what will be discussed and what the current thought process is. The bond market has put the Fed on the defensive to answer their concerns particularly on debt monetization and Fisher has reiterated that it is not what the Fed is doing. That answer is more semantics as it’s exactly what they are doing but the Fed would rather couch it in helping the private markets rather than appearing to be feeding more government spending.
