Whoa!! The Fed punted and left the bond community scratching their heads. The FOMC voted unanimously last week to leave its over-night rate unchanged with a dovish tone towards future monetary policy. The committee suggested that they were reasonably confident that inflation would rise but maybe not any time soon. Bottom line is that they produced no evidence that might signal expectations for the rest of this year. Traders have subsequently taken a 2016 rate hike off the table anticipating that the earliest might be this time next year. Bond yields have dropped significantly since this past Wednesday afternoon for 5 noticeable reasons: (1) The Fed has moved to the sideline, (2) The December durable goods order report was disastrous with headline orders down a shocking 5.1%, (3) The 4th Qtr GDP report released this past Friday was weaker than expected at +.7% which puts GDP for all of 2015 at +1.8%, (4) Japan’s unexpected move to negative short term rates, and (5) declines in corporate profits as overseas business continues to be hurt by the strong dollar and oil prices below $35 per barrel. Yields across the curve have become very expensive to the U.S. one year CMT but cheap to the rest of the world’s interest rates.