According to Yahoo News, U.S. Treasury Secretary Janet Yellen recently stated that bond market reactions to data anticipating Federal Reserve moves can be helpful, as long as markets are thoughtful about the data that informs the Fed's next moves. Yellen told reporters from Reuters that the way markets react to data is a helpful policy tool, but it comes with a caveat. "If markets are thoughtful when reading the data, it can be helpful as a complement to monetary policy," she added.
Treasury yields have experienced significant fluctuations since last month after a soft inflation print hinted that the Fed may be done hiking rates. Yields on the 10-year note are quickly falling back toward 4% after touching 5% in October for the first time since 2007. This twitchy reaction to economic data comes as the central bank has been saying they are taking a "data dependent" approach to adjusting interest rates. As a result, investors have been closely monitoring statistics on inflation and jobs data, responding to every bump and wiggle in the market.
Yellen's call for a "thoughtful" market interpretation of data echoes notes from other commentators, like former Fed economist Claudia Sahm who has cautioned investors about the quality of federal data that they react to. Economist Mohamed El-Elrian has also warned that the Fed is too numbers-driven and is constantly reacting to stale economic readings.
