Trader Talk

Stocks remind Fed: You don't control the long end

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After skimming through the full Federal Reserve minutes, I'm convinced that they are so ambiguous, so full of "on the one hand, on the other hand" jargon, so incredibly arcane and tortuous, that if you read them carefully, you could probably prove the existence of Big Foot.

Or not.

With that said, here is the sentence that seems to have animated the bond market: "...participants also considered scenarios under which it might, at some stage, be appropriate to begin to wind down the program before an unambiguous further improvement in the outlook was apparent."

In other words, tapering earlier rather than later. But the very next sentence claimed that some participants were against this idea.

Whatever. 10-year yields, which had been moving up even before the FOMC minutes, moved up further, ending near 2.79 percent, a two-month high.

At this point, we should all be done with theendless parsing of the Fed's commas and semicolons. The bias for rates is higher--the bond market wants to move rates up.

The market is reminding the Fed that while it may control the short end of the interest rate curve (one, two and three-year Treasury yields went DOWN today), it does not control the long end. The yield curve is steepening.

The markets believe there is very little downside to long-term bond yields, and lots of upside risk. It is very crowded on the bias up.

By CNBC's Bob Pisani