The belly of the curve is where policy error shows up first

Intermediate duration traded at 89.54 this morning, +0.02% on the session. Attention goes to the front end, which prices the next few meetings, and the long bond, which prices everything and therefore nothing. The middle gets ignored and it should not.

What the belly is actually pricing

Five to ten years is long enough that the specific sequence of near-term decisions washes out, and short enough that term premium is not the dominant term. What is left is the market's view of where policy settles, and how long it takes to get there.

That makes it the cleanest read on whether the market believes the central bank's own projection. When the belly diverges from the stated path, one of them is wrong, and historically it has not always been the market.

The comparison worth running

• The belly's implied average policy rate against the published projection
• How that gap has moved, rather than its level on any given day
• Whether the divergence is about the destination or the speed, which are different disagreements

Speed disagreements resolve quietly. Destination disagreements do not.

Why I am flat

The current pricing looks broadly consistent with a path I would call reasonable. That is an uncomfortable thing to write, because it is not a view anyone can trade.

The hardest discipline in macro is recognising when the market has already done the work properly.

What would change it

A divergence opening between the belly and the stated path, particularly on the destination. That is the configuration where one side has to capitulate, and positioning ahead of a capitulation is one of the few genuinely repeatable trades in rates.

Until that appears, this is a market to understand rather than one to be in.