The Bond Market Riddle is Not a Riddle

by Jeffrey P. Snider
Alhambra Partners

In January 2011, FRBNY began surveying primary dealers in order to try to gain a better understanding of how normalizing policy after two large (in their terms) programs of quantitative easing might affect money and bond markets. The banks were asked a series of questions, an array that has evolved over time, mostly about expectations for the future track of federal funds or some economic account. The Fed branch would also ask performance questions, such as respondents’ views of communication effectiveness on the part of the FOMC. Principally, it seems, the central bank was expecting to see if any irregularities could be anticipated as the world began to understand and incorporate the eventual policy exit.

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