Newsletter June 2017
FIXED INCOME UPDATE - DOMESTIC BOND MARKETS
U.S. Treasuries strengthened at month end as demand for government bonds increased in anticipation of lessening inflationary pressures. The yield on the 10-year U.S. Treasury ended May at 2.21%, down from 2.29% at the end of April.
Inflation, the primary determinant for the Federal Reserve to raise rates has been muted over the past few weeks, allowing confidence to build among investors that rates will not spike up anytime soon.
Fed members this past month suggested a slow yet consistent manner in raising rates. The Fed is being careful to communicate the rise in rates as slow and steady in order to avoid another “taper tantrum” as occurred in 2013 when the Fed spooked markets by aggressive rate hike language.
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Sources: U.S. Treasury, Federal Reserve