"I don’t expect the consensus to be right, I’m just surprised by how wrong it has been,” says Jim Bianco of bond market forecasts. The continuing rally in fixed-income has many questioning their models, including the FRBNY which last month altered its forecasting gauge to no longer include estimates from professional economists.
In what sounds suspiciously like curve-fitting, the PhDs' new model now shows the continuing rally in Treasury prices as making perfect sense.
Turning to the private sector, BofA's head of U.S. rates strategy Priya Misra sys a risk metric she's previously relied on - the gap between the rate on 10-year swaps and yields on Treasurys - hasn't worked since March. "Everyone is short and they are forced to cover," says Misra, throwing years of economics training out the window.