Here we are less than 24 hours ahead of the Fed statement with 10-year note yields peaking through the 3% level. It is as though traders are daring the Fed to unload another clip on the market after pledging to buy $300 bln in Treasuries at its last meeting (plus $700-bln in mortgage-backed securities).
My guess is that the Fed will not rise to the bait, and will instead take comfort in narrowing mortgage spreads and a steadier overall tone in financial markets. They have not been shy to take drastic action, however, so I wouldn’t bet the bank on my view…
