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Fed increase hits the short-end of the curve as long end shrugs

The Federal Reserve, as expected, increased the discount rate to 2% from 1.75% Wednesday afternoon, pushing up short-term yields but having less impact on the long end of the curve. The Fed has raised rates six times during the past 18 months, including Wednesday's increase, citing strong employment and steady economic growth.

As short-term rates have been on the rise, longer-term rates have been stickier, resulting in a relatively flat yield curve. For yields on securities maturing in seven years or less, the average increase was about 104 basis points between Wednesday and one year ago, while the average change among 10-, 20- and 30-year Treasuries was only about 48 basis points. Not exactly an inversion of the curve, but also not a solace to the market.