The Fed will be disappointed in what it sees
There's a major flattener ongoing in the bond market. US 30-year yields are down 9.6 bps on the day to 2.11%, which is the lowest since February. Meanwhile, 2s are up 0.4 bps to 0.209% and 5s are steady at 0.89% after rising 11 bps yesterday.
The Fed's old mantra was that they would let inflation and inflation expectations move up and even overshoot. Yesterday, they lost their nerve and now the market is saying that inflation is nothing to worry about.
The Fed badly wanted to see a steepener but 2s 30s are now the flattest since February at +190 bps. That's still well above the 2019 low of 42 bps but that's all from pulling the front end lower.
