Treasuries Sell Off (Yields Up) as Investors See Limits in Central Bank “Accommodation”

Today’s Fed Minutes release from the September meeting indicated a divided committee, almost split 50/50 amongst the “raise now” and “raise later” factions. Interestingly, some members perceive risk based on previous cycles where the Fed raised rates quickly after keeping them low too long. The loose policy stoked inflation which then had to be reined in with rate increases. This pattern often led to recessions. The Fed’s increasingly hawkish stance combined with the growing realization that bond buying by the ECB and Bank of Japan is tapering is triggering a sell off in government bonds worldwide. Are we at the “twilight” of ultra-accommodative Central Bank policy? Is the “toolbox” near empty? The German 10 year is now in positive territory (after being negative for several months) and the 10 year US Treasury is at 1.78%; the highest since June 2 of this year. Stay tuned.

David R. Pascale, Jr.