Bond traders bet the Fed has got it wrong on interest rates

Fri, June 27, 2014

The Financial Times

Long-time Fed watcher Lou Crandall at Wrightson ICAP terms the current stand-off between the bond market and the Fed’s forecasts as “dot disbelief.”

He says an improving economy over the summer that is not accompanied by an upward shift in market interest rates will create problems. “The Fed doesn’t want to push intermediate-term rates up prematurely, but it also wants to avoid another violent repricing of market expectations when lift-off becomes unavoidable.”

… “Investors have made a lot of money over the past few years assuming that Fed policy outcomes would ultimately be more accommodative than mainstream FOMC rhetoric implied at the time,” says Mr. Crandall.