Thursday, July 16, 2015

Fed's Yellen Signals "Bloody Wednesday" Coming Soon..........

Fed's Yellen Signals "Bloody Wednesday" Coming Soon

Yesterday, Yellen went before the House Financial Services Committee in Washington and said you better batten down the hatches – because the first rate hike is right around the corner. Yes, it was couched in her traditional "Fed-speak" manner, but the message from the following statement should be clear …

"If the economy evolves as we expect, economic conditions likely would make it appropriate at some point this year to raise the federal-funds rate target, thereby beginning to normalize the stance of monetary policy."

This year. As in 2015. 

A year that only has five or so months left. Yellen is far from alone, either. A large majority of Fed policymakers – 15 out of 17 – said at last month's meeting that they thought it would be time to hike before year-end.

What's more, the bond market isn't even waiting for the actual increases to begin! It's front-running the Fed like always, with 30-year Treasury yields surging from around 2.22% in January to 3.18% today.

Even more Fed-sensitive 5-year yields are closing in on the top end of the range that has persisted since September 2013. If they clear 1.85% or so on a closing basis, you could see all heck break loose in the bond market!

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