Odd Lots: What Does It Take to Make Bonds Less Risky Again?

How do we make bonds more bond-like again? Because, you know, if you think that what's driving yields is just investors asking for more compensation because the debt is perceived to be riskier than it has been previously, it feels like we need to return to a state where bonds could serve that hedging role, or at least not be perceived to be as volatile or stock-like as you described. I like to decompose that into luck versus policy. If you remember, in the 1990s during the Great Moderation, people were discussing, economists were discussing, was this luck or was this policy? And I think one can similarly think about that here. There is certainly an element of luck here. The nature of the shocks hitting the economy — you know, that changes. And then there is the element of monetary policy, which, as I mentioned before, having a more gradual approach to monetary policy priced in helps in keeping the bonds bond-like. What is needed in the background for this gradual approach is probably something that one would call "central bank credibility." If the trust is there, that eventually the central bank will do what is needed, then that's something that would, you know, in my models, is something that can keep the bonds bond-like.