Why 10-Year Treasury Yields Surged: Carolin Pflueger on Bond Risk
Carolin Pflueger explains why US Treasury yields spiked after 2020 as bonds lost their hedging power and started behaving like stocks.
Why Treasuries Became Risky Again
Carolin Pflueger of the University of Chicago Harris School of Public Policy joins Joe Weisenthal and Tracy Alloway to examine why US Treasury bonds have become riskier and more stock-like. She breaks down how market-perceived monetary policy reaction functions evolve, why term premia surged after 2020, and the historical link between deep sovereign bond markets and geopolitical hegemony.
Key takeaways
- University of Chicago economist Carolin Pflueger found that expected bond returns move directly with the correlation between stocks and bonds. Read more →
- In May 2021, the US economy suffered an annualized inflation surprise of 6%, yet two-year Treasury yields did not move at all. Read more →
- Alexander Hamilton stated in his 1790 report on public credit that reliable national debt is "the price of our liberty," linking sovereign borrowing directly to military survival. Read more →
- Before 2000, US Treasury bonds moved in tandem with equities, acting as risky, stock-like assets during stagflationary shocks in the 1970s, 1980s, and 1990s. Read more →
4 articles from this episode
Why Markets Ignored 2021 Inflation Surprises
Carolin Pflueger explains the learning from actions channel and why bond markets took years to price Fed rate hikes.
Why Bond Markets Decide Global Hegemony Without War
Carolin Pflueger explains how sovereign debt capacity and bond pricing dictate global power shifts before armies even march.
Why US Treasuries Stopped Hedging Stock Market Drops
Carolin Pflueger explains why US Treasuries move with equities during supply shocks, ending two decades of automatic portfolio diversification.
More Odd Lots episodes
- Everything in Markets Is Now Moving Incredibly FastOct 4 · 6 articles
- How Airlines Actually Hedge Higher Fuel PricesOct 4 · 4 articles
- Why Building a Crosswalk in LA Is KafkaesqueOct 4 · 3 articles
- AI Is Upending the Lives of People Who Do Social Media ProfessionallySep 27 · 4 articles