Mike Schumacher and Boris Rjavinski at Wells...>

FOMC: Mike Schumacher and Boris Rjavinski at Wells Fargo in Charlotte are

extremely excited by the FOMC meeting claiming to be "like a kid on his

birthday, ready to unwrap a new toy".

- While the market is widely anticipating an announcement of balance sheet

reduction, the belief is not complete and so they still expect a market

reaction. To be precise, "In the short run, say a week or two, we think

Treasuries would rally. Over a six-month horizon, we would expect yields to rise

and the intermediate area of the curve to flatten".

- Explaining the drop in yields in the short term, they point out that USTs have

faded FOMC announcements more often than not and expect a repeat. And, "for

three of the four Fed hikes, the 10yr Treasury yield has fallen in the five

subsequent trading days".

- In the medium term, they note how in the taper tantrum, yields rose most on

the parts of the curve where the Fed was most active and currently this imparts

vulnerability to the 5Y.