Predictably, media coverage of the RBA's Tuesday policy tweak was replete with nonsense. One particularly inane headline read, "Bond Tsunami Forces Australian Policy Switch in Lesson for World." The first line is: "Bond market one, central banks zero." Even if you're inclined to believe traders are capable of "winning" a fight against an authority armed with a printing press, the journalists responsible for the linked article apparently didn't start keeping score until last week. I'm not sure
3 thoughts on “Vigilante Justice”
I’m happy to cut the Aussie vigilantes some slack in contrast to their American counterpartsm who are content to buy every dip, then don their desert camo and head to the Target parking lot to do some open-carrying protesting against pandemic management, road repairs, and other insidious forns of freedom-killing socialism.
It seems that bond markets resemble a pet chasing their tails. At least for now. The idea that central banks would raise rates in response to the financial markets is silly at this point. Sometimes financial market moves must be dealt with by central banks- for instance if lending markets shut, if markets become so unglued such as UST bonds in March 2020, a financial market panic/crash- that central banks need to act as lender of last resort. But not to raise or lower a short term rate in response to a market move anticipating such a raise or cut. The central banks rightly target employment, income, inflation and the soundness and integrity of the banking system. As long as markets function to some degree, they can safely keep a watchful eye but not react to every squiggle in market moves.
Well put, RIA.