Tuesday, February 17, 2015

Fat Tuesday Gives Indigestion to Belly of Treasury Curve

The Five year Treasury has gone from goat to hero and back a few times in the last months.  It is wearing whiskers again today as if falls to a level not seen since early January, breaking free of the consolidation last week after the hard-sell on Employment Friday – Feb 6. 

Strong economic growth was absent earlier today but the number of Fed officials who have been calling for a June policy rate move continues to mount.  We would include hawks such as Lacker, Plosser, George, Bullard, Fisher and Mester and doves like Lockhart and Williams as all suggesting a June move appropriate. 

Tomorrow the release of January FOMC meeting could shed some light on the tenor of the discussion on the when of beginning policy ‘normalization’.  Should the language prompt a greater concern for a ‘patient’ language drop at the forthcoming March FOMC meeting, the belly (and front end) of the curve could find even harder selling. 

Fat Tuesday brings about excess of all kinds as I remember clearly from repeated trips this time of the year to New Orleans for Lacrosse tournaments.  Today’s indigestion in the belly of the Treasury curve may be a one day event, though I think it more lasting than that.    

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