The long end of the Treasury curve steepened significantly after the release of the FOMC minutes. The 2yr/10yr yield spread and the 2yr/30yr yield spread steepened by 9.6 and 11.5 basis points respectively. As I mentioned last week the Fed seemed to be trying to differentiate between QE and accommodative policies by indicating that they were different and that one could continue without the other. The sharp selloff in the long end is particularly surprising given the dovish tone of Chairman Bernanke’s speech last night. Even though Chairman Bernanke seemed to go out of his way to telegraph to the market that the taper was not imminent the market seemed to believe otherwise. The sell off in gold, while due in part to technical factors would suggest an agreement with the bond bears. Tomorrow we have Jobless Claims, PPI and Philly Fed. It should be an interesting morning after today’s market move.
December 11, 2008 Accrued Interest
March 29, 2009 WSP
June 23, 2009 Ockham Research