The first message from the bond market this week is that the FOMC statement didn’t matter.
- The dot chart — doesn’t matter
- Yellen saying “It probably means something on the order of around six months or that type of thing. But, you know, it depends” — the market focused on the bold but the ‘depends’ part is key
The bond market ate up all the FOMC word on March 19, tried to digest them but puked them up this week.
US 2-year yields
But that’s just the short end of the curve. Long bonds are saying something worse. 30-year Treasury yields touched the lowest since July. In that time the US economy has supposedly made progress and the Fed announced that it’s quitting QE.
A month ago there were vague indications of wage inflation but it was due to fewer hours worked by salaried employees, no one is getting a raise and inflation is nil.
US 30-year yields
But the final verdict goes to the 10-year… as it always should. The T-note has retraced the post-FOMC selloff (and more) but it hasn’t broken the March and February lows. If those levels can hold, the outlook for USD/JPY and stocks looks much better.
US 10 year yields