Hidehiko Maejima Fed Quotations

Sentiment is building that the Fed may pause for a while after raising rates to 5 percent next month. That helps shorter-maturity debt, especially two-year notes.

Employment growth will keep the economy going and the bond market will be susceptible to the strength of the data that will push the Fed to hike rates again. We expect yields to rise.

The Fed is concerned that higher energy costs may give an adverse impact on growth rather than posing a risk to faster inflation. Producer prices also showed latent inflationary pressure eased.

The inflation data we will see this week and next will support the view the Fed can keep on hiking at the next two meetings. Yields will rise led by the shorter-maturity debt.

The current fed fund rate of 4.50 percent seems to be serving as a floor for the 10-year yield.