The US Federal Reserve would implement yield curve control (YCC) if long-dated bond yields continue to rise, Billionaire money manager Jeffrey Gundlach said in a webcast Tuesday, according to Bloomberg.
“Obviously yield-curve control is lurking in the background of the conversation. I certainly do expect that Jay Powell would follow through on controlling the yield curve should the 30-year rate really get unhinged,” said Gundlach.
Longer duration bond yields have spiked in recent weeks amid growing optimism that the economic damage from the coronavirus outbreak has been less severe than initially thought and the economic activity has bottomed out.
The spread between the US 10-year and two-year yields rose to 72 basis points on Friday to hit the highest level in over two years. Meanwhile, the spread between 5- and 30-year yields to the steepest level since 2016 last week.
Under YCC, the Fed would target some longer-term rate and pledge to buy enough assets to keep the rate from deviating from its target.
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