Bond Bears Keep Reliving Groundhog Day

In the movie "Groundhog Day," Bill Murray wakes up to Sonny and Cher singing "I Got You Babe" every morning at 6 a.m. as he repeats the same day ad infinitum. Hedge funds and related speculators experience a similar torture every time a Fed chairman lays out the economic and rate framework for Congress in semi-annual testimony.

The words may change slightly, but the thrust is the same: The Fed confirms that the economy has healed from the damage inflicted by the worst recession since the Great Depression, and that the need for extreme accommodation in monetary policy is at an end. The latest iteration, under current Fed Chair Janet Yellen, was no different, keeping hedge funds in the same bearish bond trades favored since the U.S. election and predicated on the outlook for three interest-rate increases in 2017.