February 2/8/2018 - context in case the question is still around beyond today: the stock market has been falling for almost a couple of weeks in the midst of fears of overheating of the economy (increased salaries with full employment), concern about Fed rate hikes accelerating; and a huge blow to the fiscal deficit resulting from recently enacted tax cuts. So bizarre world of fiscal stimulus in a full employment economy coupled with progressive monetary tightening, already underway under Janet Yellen.
Today the US stock markets started and moved lower in the morning as the 10Y Notes yields climbed higher. I read the following on Bloomberg:
The 10-year Treasury yield resumed its march toward 3 percent, touching a four-year high and stoking angst that the Federal Reserve will be forced to tighten.
If the rates go up as a result of fiscal deficit concerns and expectations of inflation, isn't that a way of "organically" tightening? Doing the work of the Fed, as it were... If the rates just go up on their own accord, as a result of expectations that borrowing will be more difficult with a government financed on deficits, and reducing its tax revenue on top, as well as a result of concerns about inflation, isn't the market dynamics doing the job of the Fed?
Ultimately, does the quoted sentence above make sense?
If the 10Y Note climbs spontaneously beyond 3 percent, isn't it more likely that the Fed reconsiders tightening further, i.e. rising interest rates?