Interest rates moved hardly at all this week, waiting for the big load of new economic data next week — the first week of each month always brings the most important stuff.Markets are also puzzling how to play the Fed’s insistence that more hikes are coming soon, and the administration’s descent into non-function.The Fed puzzle shows in the spread between 2-year and 10-year T-notes. If you’re a 2-year trader, and get the Fed wrong, you’ll soon be delivering pizzas.The 10-year T-note has been stuck between 2.35-2.60 percent for four months, registering at 2.39 percent Friday.The 10-year T-note is stuck — if anything, more deeply stuck.The Fed manipulates the overnight cost of money, which determines the cost to leverage holdings of Treasurys (and everything else). A 2-year note is both short-term and low-yielding. If you buy a bunch of 2s expecting a certain level of the Fed funds rate, and a Fed hike surprises you… “Pepperoni on that? Thick crust?” …
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