Zach Pandl is a portfolio manager and strategist for Columbia Management, based in Minneapolis. Mr. Pandl focuses on research relating to the macroeconomy and government policy and their implications for interest rate markets. He chairs the Columbia Management Interest Rate Committee, which is responsible for formulating and articulating the firm’s view on interest rates in the U.S. and other developed markets. Mr. Pandl joined the firm in 2012 and has been a member of the investment community since 2006.
Prior to joining Columbia Management, Mr. Pandl was senior economist at Goldman, Sachs & Co. in New York. There he was responsible for original research on the U.S. economy and interest rates and the development of proprietary analytical tools. Previously, he held positions at Nomura Securities and Lehman Brothers.
Mr. Pandl earned his B.S. in economics from the University of St. Thomas and his Masters in economics from New York University.
Today’s low unemployment rate indicates modest slack in labor market, which implies earlier Fed rate hikes and/or more inflation risk. The decline in labor force participation in recent years now looks mostly structural. Investors should remain cautious around U.S. interest rate risk despite a solid first half of 2014. Excerpted from Zach Pandl’s newest whitepaper
Long-maturity bond yields are determined at a global level. Abnormally low forward rates are not just a U.S. phenomenon: there’s been a similar shift in the relationship between rates and growth across developed markets. If global rates remain persistently low, financial conditions will eventually need to tighten in other ways to offset this unexpected stimulus.
Evidence of data dependency at the June FOMC meeting suggests policy will respond to unemployment and inflation surprises. We are more confident the Fed’s reaction function is (nearly) done moving. We therefore remain cautious about exposure to U.S. interest rate risk, especially at the middle of the yield curve. The June FOMC meeting contained a
Fed and consensus unemployment forecasts are likely to come down after last week’s jobs report. It is not obvious what lower unemployment rate forecasts mean for U.S. monetary policy. June FOMC meeting should shed light on Fed’s worldview—in particular, whether the U3 unemployment rate still matters. The latest jobs report may look pretty bland on
Markets are starting to make understandable inference that Fed officials see a fixed timeline for rate hikes. Implied volatility is low because perceived policy uncertainty is low. We remain focused on modest slack and sturdy growth. Recent Fed communication brings to mind Goodhart’s Law: “When a measure becomes a target, it ceases to be a
The idea of low neutral funds rate has surprising currency, but could erode with more evidence of solid growth. We believe incoming information suggests the neutral funds rate would be moving higher, not lower. We see neutral funds rate at 3.75-4.00%, which implies an overvalued Treasury market. The hottest topic in the bond market at
Latest data showing faster growth and shrinking gaps. Normalizing economy creates asymmetry in monetary policy outlook. Fed officials might need to make a sound before interest rates move higher in more meaningful way. By now it is widely appreciated that gross domestic product (GDP) is a deeply flawed tool for tracking economic growth. But the
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