The Fed officials have been coming out in speeches the last couple of weeks with rhetoric about ‘complacency’ and other such code words for chasing risk ahead of what the Federal Reserve knows is going to be an abrupt change in monetary policy over the next six months.

The Fed is concerned because they know they want an orderly transition in markets and not causing major dislocations in markets by massive selloffs. However, the getting is so good with interest free money that participants are going to push this edge they have in markets right up until the last possible exit minute.

So despite the fact that QE ends in October with no more bond buying by the Fed, the 10-Year is still sitting at 2.50% with participants making money hand over fist with the borrow at 15-25 basis points and investing in yield instruments with massive leverage trades that has been so popular and irresistible by investors looking for ‘free money arbitrage’ opportunities.

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Read more:http://www.zerohedge.com/news/2014-07-13...rn-bond-markets