A Framework That Provides Clarity

During periods of “low visibility,” confusion reigns: for every indication of one trend, there seems to be a countertrend. The key is to glean from the collective wisdom of reliable leading indicators a clear signal that the economy is headed for a turn.

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Jul 07 2015

Greenspan Conundrum Redux

While the consensus expected 10-year U.S. Treasury yields to rise in the second half of 2014, they continued declining. Given improving economic conditions and rising expectations of a Fed Funds rate hike, this confounded the consensus as long-term bond yields typically rise in tandem with shorter-term yields.

The last time a similar situation occurred was in 2005, when long-term yields kept falling even as the Fed was pushing up short-term yields. This was known as the “Greenspan Conundrum.”

Is the U.S. now facing a “super” conundrum? ECRI has completed a study on how the disconnect between long- and short-term bond yields arises, including an analysis of linkages with international yields.

Related News & Events

Low Trend Growth, Productivity Hopes, and the Outlook

Bloomberg July 1, 2015

How long-term growth trends in productivity and hours worked help explain the long-term decline in trend growth ECRI first identified in 2008, pre-Lehman. More