For example, if 10 y bond will reach 6% and stay there Will the raise? Or they can just buy them with newly printed $? Or maybe oil at $120? Or they will think it's a tax on economy and cut instead? Or CPI 5%? or they will change how it's counted so they will still have 2%? What if altogether CPI 5%, oil $120 and bonds 6% or the only data they think improtant is GS earnings?
Use your head. What have Two year Treasuries been yielding? Even when they were on their ass early in the summer they were never above the Funds rate. I don't think the Bond has been over 5% in yield for more than 100 days this decade. I'm bearish both Bonds and stocks but the "market" sees minimal inflation beyond commodity stuff which is being caused as much by a low dollar as by any global inflation push. So yea, in your scenario they would probably tighten. We ain't anywhere near your scenario. P.S. I see a greater chance that in a month stocks are in another death plunge along with commodities off their highs than any continued short term inflation ramp.
The biggest problem with interest rates is the dominance by players who are not buying based on value. The Chinese dont care if they are losing money on there treasury purchases, therefore we have massive imbalances that are only getting worse.
Don't fight the Fed. Yeah, you made good money shorting? Cover your shorts ASAP, well not ASAP; now, and I mean now. Everything in life if temporary, everything. The time to be bearish is gone, now be bullish.