Brad DeLong suggests a trade: buy long-dated Treasury futures and sell short-dated Treasury futures.
The FOMC Inches Toward “The Beatings Will Continue Until Morale Improves”
Brad DeLong I find myself distressed by something that four little birdies have told me recently. The bond market thinks the FOMC has overdone it, or is about to overdo it. The FOMC, however, is interpreting this as: The bond market is not taking us seriously! We need to do more! It strikes me as a counterproductive positive-feedback loop: The FOMC will keep raising short rates, hoping that they will push up long rates, but instead they will push the long rate down further.