Bloomberg Surveillance · Thursday, August 6, 2026
Julia Herman of New York Life Investment Management states that the treasury curve indicates investors are uncertain not about the Fed's ability to contain inflation, but about its future 'glide path.' She explains that real yields, driven by term premium and fiscal questions, have dictated recent rate movements. Herman notes that the Fed's tools are not ideal for supply-side inflation shocks, and the market's tightening of financial conditions is more critical than specific Fed actions.
“Well, really, what we've learned from the curve in the last few weeks is that investors are struggling with not if the Fed's going to contain inflation, but what their glide path forward is from here.”
“It's real yield that has driven the rate move in the last few weeks. And this is almost all attributable to term premium. And we know that fiscal questions have been the huge contributing driver to that term premium increased lately.”
“And We also know that the fed's tools are not well suited to cope with a supply side inflation shock like the one where dealing with candidly, you know, if the FED cuts in the near tur excuse me, hikes in the near term, or stays on hold is less important right now than if financial conditions are tightening naturally across the curve.”