3 Causal Slaving of the U . S . Treasury Bond Yield Antibubble by the Stock Market Antibubble of August 2000

Using the descriptive method of log-periodic power laws (LPPL) based on a theory of behavioral herding, we use a battery of parametric and non-parametric tests to demonstrate the existence of an antibubble in the yields with maturities larger than 1 year since October 2000. The concept of " antibubble " describes the existence of a specific LPPL pattern that is thought to reflect collective herding effects. From the dependence of the parameters of the LPPL formula as a function of yield ma-turities and using lagged cross-correlation calculations between the S&P 500 and bond yields, we find strong evidence for the following causality: Stock Market → Fed Reserve (Federal funds rate) → short-term yields → long-term yields (as well as a direct and instantaneous influence of the stock market on the long-term yields). Our interpretation is that the FRB is " causally slaved " to the stock market (at least for the studied period), because the later is (taken as) a proxy for the present and future health of the economy.