Fed Minutes Widens Hike Camp as Treasury Buybacks Mask Policy Warning

The Federal Reserve's latest minutes have widened the camp willing to raise interest rates. Several officials favored a July rate increase, and many others said tightening would be needed if inflation failed to fall.

Despite this hawkish tone, Treasury buybacks drove long yields lower, masking the policy warning. The two-year yield rose just one basis point after the minutes, but the 30-year yield dropped near 5.20% due to the increased liquidity.

Ross Pamphilon of Impax believes that the larger operation is still too small for durable stability and recommends favoring 2- to 10-year bonds over longer duration assets.