The Fed's Still Happening
A Trump fiscal firehose should put Federal Reserve Chair Janet Yellen under pressure to keep inflation under control. A December rate increase still looks on track.
Look at the 2-year Treasury -- that it's little changed after the election tumult suggests the chances of a Fed hike next month are just as high as they were going into what was expected to be a comfortable Clinton victory.
The December Fed Funds contract is just 1 basis point stronger on the day so far, having taken back thoughts of a Fed delay that had pushed it 4.5 basis points stronger earlier. That the Fed might move in just a few weeks is also reflected in the stability of the euro versus the dollar, as well as the dollar/yen.
The brutal reality is bonds are no haven here, as I argued earlier today. The plunge in the price on the 30-year futures contract says it all -- this is a massive selloff and a big loss of enthusiasm for the long end.
The potential for a huge round of infrastructure spending plus tax cuts amounts to a grim day for the long end in fixed income.
An equity bounce would be the final piece of the puzzle.
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