Since the last FOMC meeting (9/21) the probability of rate hike by December 2016 has soared from under 50% to 76% today (ahead of tomorrow"s Fed statement). At the same time, the US yield curve has steepened drastically (with 2s10s up over 20bps to 5-month highs).
Chart: Bloomberg
However, unlike the last 4 Fed meetings, the US yield curve is steepening into the statement...
Chart: Bloomberg
It seems something has changed this time. Whether it is technical pressure from Risk-Parity unwinds, or a growing concern of inflationary pressures building (as ISM/PMI pointed to this morning), it is clear bonds are starting to buy the Fed"s jawboning... no matter economic data expectations remain weak at best.
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