<abstract xmlns="http://www.w3.org/1999/xhtml">
<p>The Covid-19 Pandemic and policy response rattled the US Treasury markets. Conventional US Treasuries, inflation adjusted US Treasuries, and the relationship between the two developed in ways such that ignoring changes in real interest rates yielded distorted inflation expectations estimates. Since the beginning of the pandemic, monetary policy kept nominal rates low and close to zero, but positive. Real rates, on the other hand, became increasingly negative. The relationship between the two market rates became negatively correlated, and distorted because of the fourth round of quantitative easing, along with the Fed preventing nominal yields from turning negative. Federal Reserve actions during the Covid-19 pandemic drove a larger wedge between nominal interest rates and real interest rates in the inflation adjusted market. </p>
</abstract>

The Covid-19 Pandemic and policy response rattled the US Treasury markets. Conventional US Treasuries, inflation adjusted US Treasuries, and the relationship between the two developed in ways such that ignoring changes in real interest rates yielded distorted inflation expectations estimates. Since the beginning of the pandemic, monetary policy kept nominal rates low and close to zero, but positive. Real rates, on the other hand, became increasingly negative. The relationship between the two market rates became negatively correlated, and distorted because of the fourth round of quantitative easing, along with the Fed preventing nominal yields from turning negative. Federal Reserve actions during the Covid-19 pandemic drove a larger wedge between nominal interest rates and real interest rates in the inflation adjusted market.

Unusual Changes in the U.S. Treasury Security Market During the Fourth Round of Quantitative Easing

Journal of Central Banking Theory and Practice

This work is licensed under the Creative Commons Attribution 4.0 International License.

The Covid-19 Pandemic and policy response rattled the US Treasury markets. Conventional US Treasuries, inflation adjusted US Treasuries, and the relationship...

Unusual Changes in the U.S. Treasury Security Market During the Fourth Round of Quantitative Easing

Published Online: Sep 05, 2023

Page range: 5 - 22

Received: Sep 09, 2022

Accepted: May 15, 2023

DOI: https://doi.org/10.2478/jcbtp-2023-0022

Keywords
US Treasuries, Break Even Rate, Inflation, TIPS, Federal Reserve

© 2023 Kyle D. Allen et al., published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

Unusual Changes in the U.S. Treasury Security Market During the Fourth Round of Quantitative Easing

Published Online: Sep 05, 2023

Page range: 5 - 22

Received: Sep 09, 2022

Accepted: May 15, 2023

DOI: https://doi.org/10.2478/jcbtp-2023-0022

KeywordsUS Treasuries, Break Even Rate, Inflation, TIPS, Federal Reserve

© 2023 Kyle D. Allen et al., published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

Keywords
US Treasuries, Break Even Rate, Inflation, TIPS, Federal Reserve