The real bond kings and queens sit on the Federal Reserve throne

Let me be honest. The only bond kings and queens over the past half-century since credit was unleashed from its gold standard in the early 1970s have been the US Federal Reserve chairs.

Sure, there were lauded economists Henry Kaufman and Albert Wojnilower during the frantic end days of double-digit inflation in the early 1980s but they were consiglieres egging on clients to avoid long bonds and then somewhat belatedly issuing an all-clear.

There never has been an investor that could move bond markets with a large enough wallet to make a difference. The Fed chair with the ammunition of the global currency has been sitting on the monetary throne for the past 50 years.

And now it is Jay Powell — well meaning I’m sure, but bombarded with unique pandemic-related circumstances that make me wonder whether he has changed his conservative clothes and unleashed the potential for chaotic future economic and market outcomes.

Granted, he is conjoined now more than ever with the Treasury and forced to accommodate peacetime deficits of unimaginable size. That these fiscal and monetary monarchs have logical intentions is not in doubt — a return to a pre-coronavirus economy of 3 per cent real growth and 2 per cent inflation is their goal. Still, how does Powell (and Washington) get there, and for how long do they keep their “pedal to the metal”?