As part of its effort to stress its own self-importance, the Federal Reserve conducts a survey of the Primary Dealer members through its New York branch. A written questionnaire is sent out to each bank in advance of every monetary policy meeting. The purpose is for monetary policymakers to make sure that there aren’t any big surprises, that the market, or, in this case, orthodox Economists working for one part of the market, is seeing things consistent with how the Fed wants them to.
In September 2013, the Primary Dealer Survey questions included a few pertaining to the then ongoing ‘taper tantrum’ roiling markets around the world. It was ‘reflation’ #2 and like the others, both the one before and the one after, it came on rather quickly and harshly. On the issue of benchmark interest rates, in the form of the UST 10s, the Primary Dealers all saw interest rates rising still further into the foreseeable future.
Of those surveyed, 65% believed that the 10-year yield would be above 3% by the end of 2014; more than three-quarters, 78%, thought the same for the end of 2015, including 15% who were expecting the 10s to get above 4.50% compared to just 6% who guessed, correctly, 2.01% to 2.50%.
This post was published at Zero Hedge on Dec 14, 2017.