Once again, the bond market is signaling to the Federal Reserve that interest rates aren’t high enough. The 2-year Treasury yield, a leading indicator of the Fed’s interest rate policy, has risen to 4.1%, well above the upper end of the Fed’s target range of 3.50%-3.75%. At the same time, the yield on the 10-year Treasury — a warning about investors’ inflation expectations — nearly touched 4.7% before backing off Wednesday. “The Bond Vigilantes are threatening that if the Fed doesn't tighten credit conditions, they will do so to maintain law and order in the economy,” Ed Yardeni wrote this week in a research note. ... (full story)