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The adoption of the US fiscal reform has induced a sharp upward revision of the monetary policy expectations

US 10y. yields have hit 2.90% over the past few days. The adoption of the US fiscal reform on December 19 has clearly been the driver of long-term rates for the past two months.

The wage growth figure published on  February 2 has only been a catalyst. The adoption of the fiscal reform has extended the US economic cycle and this has created room for some fed funds  tightening in 2019. But one has also to underline that not only the Fed rate expectations have been revised up : the ECB rate expectations for 2019 & 2020 have also been revised up (no recession in the US soon implies less disruption for the European cycle). Actually, markets expect even more rate tightening in Europe than in the US in 2019 & 2020.  

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DRUT Bastien , Fixed Income and FX Strategy
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The adoption of the US fiscal reform has induced a sharp upward revision of the monetary policy expectations
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