Bear steepening, the Fed reaction function, and a 2019 crunch for marginal debtors

I am looking forward into 2019 at this point. And if you look at the Fed's summary of economic projections from June, you see a median projection for the fed funds rate moving from 2.4% at the end of this year to 3.1% at the end of 2019. So that means the Fed is guiding to three rate hikes for 2019. Let's talk about that in the context of the recent bear steepening of the Treasury yield curve
From bear flattening to bear steepening
When you look at the slope of the yield curve and short term rates are going up, irrespective of what's happening at the long end, it's considered bearish. But up until now, we have been in a bear flattening environment, with the short end of the curve selling off tremendously as investors move to the Fed's stated forward guidance.

For example, a year ago the c...


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