Oversold Market Giving Lift to Notes and Bonds

December 13, 2016 7:15AM CST

With sentiment readings in the basement and some bargain hunting emerging after huge historical rise in yields this fall, a precarious balance has developed in the fixed-income sector awaiting the fed meeting. There is about a 100 % chance of a ¼ point rate hike this afternoon, but most likely it will be treated as a non-event because the real show remains the Trump bull market in stocks. Stocks are higher again today, but with some vicious rotation. Where it will all stall out is anyone’s guess. The buoyant stock market, and talk of a shift to more fiscal stimulus by the new administration, is certainly a challenge to the fed, so the news conference this afternoon will be interesting. On top of all this, the treasury will be selling 118 billion in new debt next week. Another sentiment poll the fed will have to weigh is the dramatic shift in confidence polls to a nine-year high, with advent of new administration. This is something new and may point to the fed being way behind the curve in their management of short-term rates.

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