But Wall Street traders were starting to disobey. The yield on the 10-year note 10_YEAR +0.67% has been heading the other way. UBS economists have declared the three-decade long bull rally in government bonds is set to end.
Bernanke is fearful that an increase in yields will kill off the recent gains seen in the U.S. economy. That’s why the Fed has started quarterly press conferences and revealing the interest rate forecasts of Federal Open Market Committee members — all to keep a better grip on interest rates.
But that grip is loosening, and probably not helped by the hawks on the Fed who have been on the warpath saying the central bank really isn’t committed to low rates, after all. Just an hour before Bernanke spoke, Philadelphia Fed President Charles Plosser was in Paris, warning an audience of a central bank without boundaries.
We’ll go bankrupt two ways: “Gradually, then suddenly.”