Two points to make.
The entire universe of Treasury securities yield less than the Fed's overnight rate. It's impossible to then argue that Bond Traders let alone 2yr traders are screaming for renewed tightening.
Secondly, Liberal politicians speak of hawkish Central Bankers in despairing terms. Lib's like low rates, full employment, the masses borrowing and paying it back in depreciating dollars, ect. Bernake wasn't speaking to the markets but rather he was speaking to the Barney Frank Party.
Jeez, two months ago the credit markets were pricing in close to 75bp in cuts. For Bernanke to be overly hawkish would be contrary to the most sacred indicator of all, Treasury prices. They ain't yelling inflation in a crowded theatre. In fact it was the rise in Bonds this morning that got stocks spooked right out of the hole. Since 2002 stocks have embraced growth, even with the inflationary pressures inherent to a weak dollar, war time, robust economy. Deflation scares mutual investors more than inflation during this particular time. That psychology of course will change.
I'll be surprised if this doesn't spur a steeper curve.
Edited by Pabst, 10 July 2007 - 05:16 PM.
