The rout in the US government bond market can be attributed to the absence of all of its anchors, according to Mohamed El-Erian.
Fed officials have been determined to rein in inflation and bring it back down to their 2 per cent target. But El-Erian said there is a “danger” in trying to get it to that level too quickly.It’s been a week for the Treasury market books, said El-Erian. In the first part, yields moved lower on dovish speak from Federal Reserve officials.
On Friday, 30-year yields fell amid mounting geopolitical tensions, unwinding part of the previous session’s rally.At 2.21pm in New York on Friday, the yield on the 10-year note had fallen 7 basis points to 4.63 per cent. The 30-year was yielding 4.78 per cent. “The major financial stability risk right now is the unusual volatility. It tends to break things. That’s what we have seen in the past. So far, the financial system has been incredibly resilient, and we should all be thankful for this.”