Timing interventions in the market moved from clumsy to strategic when Bob Rubin advised the Japanese MOF on Yen chart patterns. The Fed utilized the tactic yesterday AFTER the refunding to great effect. By allowing post-Employment flows to play out and chilling during the supply, the Fed was able to "goose" an already shifting direction rather than provide "hittable bids" in a liquidation.
An actual practitioner of any size can attest that the Note market had bottomed on Tuesday and withstood decent selling pressure (for first time since Ben last spoke) and 2 sloppy auctions well before John Hilsenrath dropped a "No shit Sherlock" tape bomb of the already stated. The Fed continues to struggle with a goal of better transparency but the reality is market participants "hear" price much louder than rhetoric.
We continue to believe the direction of rates-UP- is accurate and with us for a long time. The fashion in which they were rising-belly led - was getting sketchy and thus rhetorically tempered. The FOMC will be discussing pull back process behind closed doors while publicly working the punch bowl ladle. Note yields remain one of the best images of growth and inflation contrary to QE policy bear's distortion rants. The 70s experience and long disinflation mean reversion continue to haunt a generation of rates trader's memories. The pages of history prior exhibit far less volatility. (see Sydney Homer et al.)