About Matthew Toms
In September 2019, Matthew Toms, Chief Investment Officer of Fixed Income at Voya Investment Management, commented on Treasury yield movements and Federal Reserve policy. He described the steepening of the yield curve as reflecting a "pragmatic and patient" approach by the Fed, allowing the economy to grow. Toms stated that the move higher in yields was led by the long end of the curve, not the two-year, and noted the absence of confirming signals from inflation breakevens or currency markets that would indicate an acceleration of inflation. He characterized the situation as "Goldilocks" but expressed concern that the European Central Bank might eventually need to align with the Fed, which could affect markets.
Toms also addressed political pressure on the Fed, saying he would urge President Trump to stop criticizing Fed Chair Jerome Powell, adding that Powell had "done a nice job" and his approach "trumps the political pressure." He attributed the rise in yields partly to the narrowing of trade tensions, describing it as a "narrower band of uncertainty" that markets favor, despite potential difficulties for the U.S.-China trading relationship.
Source: AI-verified profile updated from Matthew Toms's recent appearances.
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Transcript (5 segments)
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Matthew Toms0:00
The steepening of the yield curve... the important point here is this is not a pile push higher. We think this is a pragmatic and patient pile. This is about the Fed being slow enough to let the economy grow, kind of a go-with-the-flow, if you will. Things are in motion to gently push rate hikes and continue this rally in risk markets. And nothing we see today really will stand in the way of that.
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Interviewer0:23
I mean, if the president were to hear you talking, he might not always keep... he may change his tune a little. You say that this is showing good moderation and patience with the Fed, and what they're doing is actually allowing the economy to grow. And it might be self-defeating to stay too low because then you've got to go too quickly when inflation comes back. So you would urge him to stop bashing Powell, I'll bet, wouldn't you?
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Matthew Toms0:49
I think Powell's done a nice job, and his approach certainly trumps the political pressure, no pun intended. But importantly, again, you're not seeing the two-year move higher; you're seeing the ten-year move higher. You're also not seeing many other things move. The inflation breakeven assumption has not moved higher meaningfully. You're at 2.16%. You've also not seen a confirming sign in currency markets. Really very few signs that the market should be afraid of an acceleration of inflation here. So without a confirming signal from another market, this looks like a continued gradual push higher. Let the long end lead the Fed. That's the way out of this.
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Interviewer1:25
I mean, you sound like this is totally Goldilocks from where you're sitting.
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Matthew Toms1:31
It is. The non-manufacturing ISM numbers are very good. You still have the one element of Goldilocks that has a bit of a concern: as the ECB eventually has to get in line with the Fed and start moving, European rates have not moved higher. Eventually, as they move, that can be a concern for the market. The one other thing we think people maybe miss is the narrowing of trade tensions is good news. It's focused on China; that may be tough for that trading relationship, but it's a narrower band of uncertainty, and the markets like that. We think that's supporting this move higher in yields.
