The economic data being released is still being impacted by the hurricanes in late August and early September. It is largely being ignored by the bond market. This market continues to price an expectation of an increase in managed rates by the Fed at its December FOMC meeting. The two-year treasury is the most sensitive to Fed action and it has risen by 13 basis points in the last month. The ten-year has risen in yield by the same amount. Most of this movement has been in the last two weeks as investors have ignored weak economic data and low inflation reports, believing it does not reflect the true strength in the U.S. economy. The inflation data has been reported as increasing, but this has been driven by weather related dislocations. We will need to wait until the November data released in December to get the first of the non-weather impacted economic data.

Investors are pricing in a Fed move and not an increase in inflation…

ProBank Austin Advisor – October 23, 2017