High Five, Five Low, Too Slow

By Teeuwe Mevissen, Senior Macro Strategist at Rabobank

Most of us probably remember the silly joke that was often performed at the school yard when someone would shout ‘high five’ and put his/her hand up high, inviting the other to give a high five. It was then proceeded with saying ‘five low’ and extending your hand to invite the other to give a five low but then the hand is quickly pulled back so that the other slaps in thin air while getting the message that this person was too slow. It makes today’s author of the Global Daily think of current interest rate markets, which have shown large swings recently. The main reason for those swings is that market participants seem to wonder whether the current Fed funds rate – which hoovers around the level of 5.3% – is seen as too high or actually too low. And, following this question, whether the Fed might be too slow with either raising or lowering interest rates going forward.

Since the last meeting in which the Fed kept the target range for the Federal funds rate unchanged, longer yields have been taking a nose dive bringing the 10-year yield on US government bonds from a level of nearly 5% towards the level of 4.53%…