Nevertheless, this will be an interesting test of the view, which I and some others have espoused, that the Fed is in the process of shifting operating regimes -- from following markets to being more willing to lead them.

Last week’s disappointing reading of 0.7 percent gross domestic product growth for the first quarter, the lowest in three years, added to other data releases (such as retail sales, inflation and autos) suggesting that the U.S. economy -- and consumption in particular -- is going through a softer economic patch. In previous years, this would have provided the Fed with the excuse to soften its policy signals, assuring markets that monetary policies will remain ultra-stimulative and minimizing the risk of financial asset volatility. Indeed, these are the signals that the European Central Bank reiterated last week when its governing council met. And the ECB did so despite official recognition that, in the case of the euro zone, economic conditions have improved and forward downside risk is lower.

The Fed’s inclination to repeat past practices is countered by three considerations.

* An element of the recent data weakness is likely to be both temporary and reversible.

* The Trump administration has reiterated its intention to pursue a large tax cut that, if approved by Congress (a big if), would most likely lead to a considerably wider budget deficit, at least in the short-run until economic growth and budgetary receipts pick up (especially given the lack of large revenue measures).

* Though even harder to quantify, the Fed is not indifferent to the collateral damage and unintended consequences of prolonged reliance on unconventional monetary policies.

Eoin Treacy's view

I believe the bond market is exhibiting what I term a “boy who cried wolf” mentality. After so many warnings and almost a decade where the Fed’s inflation target was wide of the mark on consecutive years there is no appetite for pricing in rate hikes until they are deemed to be imminent. I agree with El Erian, the flow of stimulative rescue funds has a conditioning effect on those benefitting from them. There is no credible belief that the Greenspan, Bernanke and now Yellen puts will be withdrawn.

These are textbook characteristics of the latter stages of a bull market. The risk of contradicting the bullish complacency is deemed to simply be too high, not least because it has been proved right time and time again that buying the dips works. Therefore in order to complete a top that strategy has to fail.

In the meantime 2-year yields have one of the most compelling first-step-above-the- base formations of any market.