The Fed will grace us with its creative writing skills later today. The big wire houses have sent out complicated and "all bases covered" missives on rate hikes and blue dots. Its all getting very tiring.
Our take remains market determined rates (such that they still exist) are going up. Jobs and the end of the credit crunch mean quicker velocity and demand for credit. Some will opine that the quality of borrowers across the spectrum is less than stellar, this is a problem for farther down the road.
The focus on the Fed, from LSAP to Death Star to moving the base rate is a popular delusion. The Fed is not advancing a preemptive agenda. This Fed is cautious and reactionary. The second half of 2014 (yep, its almost half over) will be about the term structure reintroducing itself as a feedback loop policy makers. The flatter curve saved a lot of misguided notions about market direction in Q2 (guilty), Now, I'm less confident about the shape of the curve but more confident the direction is down.
Here's our advice: Avoid the noise and quick over analysis of the statement. Look for a dissent to challenge the Yellen/Dudley idea of "slower and lower". Keep in mind the fanciful tales of May as to why the Note market was up. Pay fixed.