Historically quiet rate environment. It’s been a quiet year for interest rates as fixed income traders reconcile a Federal Reserve (Fed) pause and slowing global growth with accelerating inflation. The 10-year Treasury yield has closed in a 23-basis point range (0.23%) this year, the second-smallest range to begin a year since 1974 (2017 has been the smallest over this period). Other gauges suggest the calm may continue: the MOVE Index, which measures implied volatility (or expected future volatility) in Treasury options, fell to its second-lowest level ever on February 20. We expect rates to eventually break out of this range as headwinds subside and growth stabilizes, and we forecast the 10-year yield will end 2019 in a range of 3.0%-3.25%.
Powell heads to Capitol Hill for semi-annual testimony. Fed Chairman Jerome Powell will testify before the Senate Banking Committee today, followed by an appearance before the House Financial Services Committee tomorrow. Since his last testimony in July 2018 the economic landscape has shifted as consumer and business sentiment has eroded, the economy is starting to show signs of deceleration, and inflation has yet to move meaningfully above the Fed’s 2% target as anticipated. Consequently, the central bank is tapping the brakes after raising interest rates four times last year and embarking on a balance sheet reduction plan in an effort to normalize monetary policy. Over the next two days, investors will be monitoring the hearings closely, listening for any clues about further shifts in policymakers’ plans.
Investment-grade debt shines. Over the past three months, investment-grade (IG) corporate debt has posted its strongest rally in more than two years as investors look for the sweet spot between quality and risk in fixed income. On the LPL Research blog today, we’ll dive into our case for owning IG debt as rates stabilize and the business cycle matures.
Another amazing streak. The S&P 500 Index closed above its 10-day moving average for the 35th consecutive day, topping the streak of 34 days coming off of the February 2016 market lows. This is now the longest such streak in nearly nine years, yet another way of showing just how persistent the bull rally has been since late December.
- Housing Starts (MoM, Dec)
- S&P CoreLogic Case-Shiller Home Price Index (Dec)
- Conference Board Consumer Confidence Index (Feb)
- Pending Home Sales (MoM, Jan)
- Durable Goods Orders (Dec)
- Eurozone Economic Confidence Index (Feb)
- Japan Industrial Production (Preliminary, Jan)
- China Manufacturing PMI (Feb)
- GDP Report (QoQ, Q4 2018, Initial and First Revision)
- Germany CPI Report (Preliminary, Feb)
- Japan Jobless Rate (Jan)
- Japan Tokyo CPI Report (Feb)
- Caixin China Manufacturing PMI (Feb)
- Core PCE (MoM, Dec)
- Markit US Manufacturing PMI (Feb)
- ISM Manufacturing PMI (Feb)
- University of Michigan Sentiment Index (Feb)
- Japan Consumer Confidence Index (Feb)
- Germany Unemployment Claims Rate (Feb)
- Eurozone Unemployment Rate (Jan)
- Eurozone CPI Report (Feb)
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Index data obtained via FactSet
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