Trader Talk

Fed hawks and doves align; tapering imminent

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This afternoon, Cleveland Fed President Sandra Pianalto, a moderate and nonvoting FOMC member, added her voice to the Fed chorus saying, "If the labor market remains on the stronger path that it has followed since last fall, then I would be prepared to scale back the monthly pace of asset purchases."

So hawks, doves and moderates are all now saying they are inclined to begin tapering sooner rather than later.

This week, have been slightly down, and 10-year Treasury yields have come down to 2.60 percent or so after hitting 2.66 on Monday.

With tapering so widely trumpeted, it's logical to argue that the markets are getting used to tapering without falling apart. Good news.

Some are trying to turn the whole story upside down, arguing that the opposite is the case: that the bond market is signaling it doesn't believe all this Fed talk of imminent tapering.

Sorry, I don't buy that. You are not seeing any big movement in 10-year Treasury yields as these Fed members are coming out saying tapering is imminent. Seems to me that this argues that a large part of a modest tapering (say, to $65 billion a month from $85 billion) is already priced into 10-year Treasury yields.

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