El-Erian says Japan policy outlook matters more than Fed Chair debate
- Adam German
- 12 minutes ago
- 1 min read
Mohamed El-Erian, Allianz chief economist and former PIMCO CEO, joined CNBC Closing Bell on December 5th to break down why U.S. bond yields are moving and why the shift has little to do with speculation over the next Fed Chair.
He says the recent rise in Treasury yields is more likely tied to expectations that the Bank of Japan may raise rates this month, a move that could draw Japanese capital back home and push U.S. yields higher.
When the Fed cuts rates and the BOJ hikes, the yield gap shrinks, capital shifts back to Japan, and the yen naturally strengthens.
Key Topics Covered
Allianz chief economic advisor Mohamed El-Erian says bond-market fears over Kevin Hassett becoming the next Fed Chair are not reflected in market pricing.
No signals of concern are visible in yield curve steepening, breakevens, or rate-cut expectations.
Recent movements in yields are likely driven by developments in Japan, not by speculation over the Fed Chair selection.
Regardless of who becomes chair, the next leader will inherit a fractured Federal Reserve and will need time to establish authority.
El-Erian stresses that markets should focus on the long-term need for Fed reform, which all shortlisted candidates acknowledge.
The next Fed Chair must provide a unifying, forward-looking vision, which El-Erian argues is currently lacking.
El-Erian expects the Fed to cut rates next week, aligning with market expectations.
He anticipates a hawkish cut, framed around confusing and incomplete data, reflecting the Fed’s backward-looking, data-dependent approach.
