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Breaking Up

The Fed will end outright bond purchases this week, barring any surprises from this week’s Fed meeting. The end of bond purchases should not create much market reaction, as bond investors focus more on global economic growth and expectations for interest rate hikes. The Fed’s breakup will not be a clean one as it maintains a steady influence in the MBS market.

Stay on Guard

Yields may remain low for evidence of any fallout or contagion to the U.S. economy; a stretch of stronger economic data or bolder action by overseas central banks are likely needed catalysts for higher yields. The on-guard mentality in the bond market has pushed back timing for Federal Reserve interest rate hikes.

Disinflation Infatuation

Inflation expectations have fallen sharply in recent weeks, driven by European disinflation, lower energy prices, and overall growth concerns. The persistence of low inflation expectations may intensify the “lower for longer” theme via lower growth expectations and delays to potential Federal Reserve (Fed) interest rate hikes.

Slowing Momentum

A challenging bond market environment will likely persist over the remainder of the year and perhaps beyond. Valuations across many bond sectors remain above historical averages and reflect an expensive market. We believe corporate bonds may provide investors with the best defense in what will likely be a continuation of the low-return environment.

The State of States

A change of seasons should be noted by municipal investors, as a seasonal increase in new issuance may be a catalyst to lower returns after a strong 2014. It is not uncommon for revenues to slow as the economy matures, and we do not view the slowdown in state tax revenues as worrisome for municipal bond investors.

 
Results: 21 Articles found.
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