Between a Rock and a Hard Place

Don't look now but the yields on the short-end (2 and 5 year) US $ Treasury Bills have been ratcheting upwards. Take a look at :



Note the upward shift at the short-end of the curve.

Treasuries are pricing in an increase in the Fed Funds Rate (FFR). I don't buy the Recovery in 2008 argument so what that means is that the Fed needs to raise rates to fight inflation (or more correctly inflation expectations). Most likely the ECB and the Japs let Bernanke have it - "listen you old so and so... if you don't raise rates now the dollar is f*&^%$#"