The noise surrounding the U.S. Interest Rate Market has been all Fed all the time. For headlines and theory, that’s great. For market participants who live in the real world, we like to focus on what the market is actually doing, not what a group of economists may or may not be thinking 8 times a year.
The real story is not what the Federal Reserve is saying. The story is that the yield curve is and has been narrowing. In other words, the spread between long-dated Treasury bond yields and short-term yields has been getting smaller and smaller. Notice how 2-year yields are hitting 5.5-year highs this week, but 30-year yields won’t budge as they remain near the same levels from a year ago.
There are plenty of charts that tell this story well, but I think these two [Read more…]