With the latest hike in their target interest rate, The Fed Funds Target Rate, Yellen and the FOMC have now completed 4 rate hikes since December 2015 (although my friend Chris Whalen claims there will be no more).
One reason why Chris Whalen may be right is that The Fed is bucking the headwinds of no rate changes by other Central Banks.
Yes, I left off the Bank of England because I ran out of room. But it is the same for the BofE — no change. But the BoE has cut rates once while The Fed has increased rates 4 times.
To highlight the impact of The Fed’s 4 rate increases, I compare the US Treasury yield curve (actives) with the Japanese sovereign curve for today versus December 1, 2o15 before their first rate hike. Notice that the US Treasury curve has been flattened for 10 year maturities and lower. The converse is true for the Japanese sovereign curve: their curve is lower, particularly in the mid-to-long end of the sovereign curve. But still flattening. The bright lines are for today, the darker lines are for December 1, 2015.
The UK sovereign curve, like the Japan sovereign curve, is flatter today than on December 1, 2015. But most of its flattening occurs at the mid-to-long end of their curve.
Yes, Yellen and The Fed are “A Hawk in The Crowd.” Amongst pigeons. Or a pigeon among hawks.