Capital Econ: Treasuries remain vulnerable to a recalibration of rate expectations

Bond traders and economists are expressing noticeably varying opinions regarding the expected longer term implications of a Federal Reserve rate hike, an October 14 Capital Economics report notes, and this relative value gap is a sign “Treasuries are vulnerable.” Judging by Treasuries, economists looking for fed funds rate to rise by 2 percent in two years, market says 1.3 percent Coming into today’s trading, economists polled by the Wall Street Journal expect the U.S. federal funds rate to rise by nearly 2 percent in two years. This median forecast, however, is much higher than the current rate of nearly 1.3…