“The US Treasury market is not waiting until December 18th to see what the Fed will do, it is instead continuing its attempt to tighten policy for them. The process was interrupted on September 18th and somewhat in early October but has since resumed. The 10 yr note yield at 2.77% compares with 2.85% on September 17th and with the close of 2.69% the day after when the FOMC didn’t take what the market was giving them. This action begs the question that assuming we enter the December meeting with the exact circumstances we have today in terms of data and market levels, will the FOMC fool the market again or not? Either way, what we are witnessing AGAIN is the bond market reasserting its power over the long end of the curve notwithstanding all the money being spent by the Fed.
Fisher spoke overnight in Australia and repeated again his concerns with QE. “There’s a tipping point where monetary accommodation comes to be viewed not as the pleasant stimulus that levitates bond and stock and housing markets all over the world. But, instead becomes an agent of financial recklessness.”
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