Why Are Traditional Investors So Hungry for Yield Curve Control?

The Breakdown

Blockworks

Investing, Business

4.8 • 786 Ratings

🗓️ 23 August 2020

⏱️ 18 minutes

🔗️ Recording | iTunes | RSS

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Summary

On today’s edition of The Breakdown’s Long Reads Sunday, our selections have to do with one of the hottest topics in central banking: yield curve control. “What Is Yield Curve Control?” The first piece is from the St. Louis Federal Reserve and is a primer on YCC, including past U.S. implementations as well as versions from Japan and Australia. “Market Jitters Show How Much Fed Medicine Matters” Our second piece is an op-ed about how dramatically markets reacted to this small detail from the Federal Open Market Committee minutes, and what it suggests for their desires involving YCC.

Transcript

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0:00.0	Welcome back to The Breakdown with me, NLW.
0:08.2	It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world.
0:15.2	The breakdown is sponsored by crypto.com, BitStamp, and nexo.io, and produced and distributed by CoinDes.
0:24.1	What's going on, guys? It is Sunday, August 23rd, and that means it is long reads Sunday.
0:32.0	This is the episode each week where instead of doing my own analysis or featuring an interview,
0:37.0	I read an article or two,
0:39.1	as is the case this week, that teach about or inform on some important topic. This week I'm
0:45.5	doing a two-parter on yield curve control. It's a concept that was in the news in the context of
0:51.7	the FOMC meeting from last month whose minutes were just released this
0:55.5	week. And it's a concept that I think you're going to be hearing a lot more about. So the two pieces
1:01.6	I'm going to read today. The first is from the Federal Reserve Bank of St. Louis. It's called
1:06.4	What is Yield Curve Control? It was just written about a week ago. This is a primer. So if you've
1:11.9	already familiarized yourself with this, if you have been thinking about and know about yield curve
1:16.1	control, that's not the one for you. However, the second article is called Market Jitters Show How Much
1:21.5	Fed Medicine Matters by John Authors from Bloomberg Opinion. That one is a little bit farther down.
1:27.5	So skip ahead if you already know about yield curve control, but want to hear that point of
1:32.4	view.
1:33.2	That said, let's do what is yield curve control from Tuesday, August 11th, 2020 by Kevin
1:40.2	L. Kleason, Research Officer and business economists and Catherine Boken, research associate
1:45.4	at the Federal Reserve Bank of St. Louis. Traditionally, the Federal Open Market Committee
1:50.9	targets the federal funds rate as a primary tool to conduct monetary policy.
1:56.1	The Fed funds rate is a rate with a very short maturity.
	...

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