Waller: Safety Premium for Treasuries Disappears, Neutral Rate Estimate Rises

Federal Reserve Governor Christopher Waller said the safety premium for U.S. government debt has largely disappeared, leading him to raise his neutral rate estimate and potentially higher policy rates.

This means that investors are no longer willing to accept lower yields on Treasury bonds in exchange for their perceived safety and liquidity.

Waller cited research from Stanford Graduate School of Business finance professor Hanno Lustig showing this premium has been eroded over several years.

He added that he is inclined to be patient on interest rates, saying 'Give disinflation a chance,' if upcoming data confirms that inflation pressures are cooling off.