Krugman is right about the market reaction to the Fed’s tapering

Paul Krugman penned a New York Times Op-Ed, "Et Tu, Bernanke?", referencing the famous Shakespeare quote "Et tu, Brute" which is generally used to signal betrayal from someone unexpected. Krugman meant to say that the Fed has betrayed the American economy by moving away from QE too early. And while I take issue with this framing of the situation, I agree wholeheartedly with how Professor Krugman interprets the market reaction to the Fed's telegraphing its QE timetable.
As I write this, the 10-year US government bond is yielding 2.60%, whereas it had been 2.18% on June 18th prior to Bernanke's QE tapering clarification. So clearly, the market reaction to Bernanke's tapering talk has been negative for interest rates in the US - and globally. The question is why? As a reminder, here's what I...


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