Bond Traders Have Been Calling the Fed's Rate Hike Bluff

I read an interesting Bloomberg article on the way into class this afternoon. From Bloomberg:

The market is essentially calling the Fed’s bluff. Traders are betting that policy makers won’t be able to raise rates this year without disrupting stocks and bonds, something that they’d really rather not do. So either U.S. policy makers will have to risk another market-wide tantrum, or they’ll give in to traders who embrace the idea of these historically low borrowing costs sticking around for longer.

“In the end, the Fed is more likely to ‘cave’ to the market as opposed to ‘fight it’ by hiking when the market does not have it priced in,” Jim Bianco, president of Bianco Research LLC, said in an e-mail. The Fed still sees low rates “as beneficial and does not want to undermine all the work they have done over the past several years.”

I've been saying this and saying this and saying this and saying this through all of 2014 and 2015 so far. The Fed can't actually raise interest rates... forget the 25 bps that they are so afraid of charging to the carry-traders.

Everyone that is leveraged up cannot afford higher interest rates. Ok, probably 25 bps higher, sure. But not a "normal" rates, for sure. That includes the US government, big banks, hedge funds, and even your non-finance corporations can't afford higher rates!