While the long end of the US bond market has been selling off for several weeks now, with 10 year yields over 3.9% and approaching twice the levels seen at the peak of the depression / deflation hysteria, late last week 2 year bonds also began to slump dramatically. Yields surged 34 bps on Friday and the market is now implying a Fed rate hike by end 2009, and a series of quarter point moves every couple of months through 2010. This move, if sustained, has major implications across asset markets.
