As noted yesterday, Bloomberg trading commentator Richard Breslow refuses to jump on the bandwagon that the Fed is hiking right into the next policy mistake. In fact, he is pretty much convinced that Yellen did the right thing… she just needs some help from future inflationary print (which will be difficult, more on that shortly), from the dollar (which needs to rise), and from the yield curve. Discussing the rapidly flattening yield curve, Breslow writes that “the 2s10s spread can bear-flatten through last year’s low to accomplish the break, but I don’t think you get the dollar motoring unless the yield curve holds these levels and bear- steepens. Traders will set the bar kind of low and start getting excited if 10-year yields can breach 2.23%. But at the end of the day we need another 20 basis points for the entire narrative to change.”
To be sure, hawkish commentary from FOMC members on Monday (with the semi-exception of Charles Evans) and earlier this morning from Rosengren, is doing everything whatever it can to achieve this. Here are the highlights from the Boston Fed president.
ROSENGREN SAYS LOW INTEREST RATES DO POSE FINANCIAL STABILITY ISSUES ROSENGREN: LOW RATES MAKE FIGHTING FUTURE RECESSIONS TOUGHER ROSENGREN SAYS REACH-FOR-YIELD BEHAVIOR IN LOW INTEREST RATE ENVIRONMENT CAN MAKE FINANCIAL INTERMEDIARIES, ECONOMY MORE RISKY
This post was published at Zero Hedge on Jun 20, 2017.