Post Fed...

In case you didn't hear, no rate hike today.

Anyway, I argued that the Treasury market would sell off after the Fed. Well, the 30-year did. The 10-year was flat, and the short end rallied a bit. Fairly big steepener from both 2-10 and 2-30.

Going into it, I thought there were too many bulls in the bond market, and I figured that a somewhat hawkish Fed statement might smoke 'em out. I read a statement like the following: "Nonetheless, the Committee judges that some inflation risks remain. The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information."

That sounds like there is a good chance that the next move is up, even if its not for a few months. And maybe the next move isn't up, but if the next move until more like the end of 2007, the 2-year rate doesn't make much sense.