Wednesday, September 27, 2017
MANAGING DIRECTOR: Scott Carrithers   PORTFOLIO SALES AND SERVICE: Steve Panknin • George Morris • Jeff Goble • Chris Thompson • Sean Doherty Robert Brickson • Kevin Doyle • Lonnie Harris •  Mark Tranckino • Robert Schuyler  Tom Toburen • Josh Kiefer • Nicole Burczyk • Kelley Frye • Natalie Regan • Aaron Stoffer

US Treasury Market
Date	1 mo	3 mo	6 mo	1 yr	2 yr	3 yr	5 yr	7 yr	10 yr	20 yr	30 yr
9/20/17	.98	1.04	1.20	1.32	1.45	1.60	1.89	2.12	2.28	2.59	2.82
9/21/17	.99	1.04	1.19	1.31	1.45	1.59	1.89	2.11	2.27	2.57	2.80
9/22/17	.97	1.03	1.19	1.30	1.46	1.58	1.88	2.10	2.26	2.57	2.80
9/25/17	.97	1.05	1.19	1.30	1.44	1.56	1.85	2.07	2.22	2.53	2.76
9/26/17	.96	1.06	1.19	1.31	1.45	1.57	1.87	2.08	2.24	2.54	2.78

                   

Source: U.S. Department of the Treasury, as of 9/26/17

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Trump Bump Strikes Again

Yields moved and closed 1-2bps higher yesterday on the back of Yellen's speech and are even higher as word got out overnight that Trump's tax reform plan will be released today.  UST 10yr is currently at 2.29% testing that 2.30% support level.  

Yellen reiterated and gave a lengthy explanation of the Fed's view to stay on this gradual path of hiking rates.  The persistently low inflation is unexpected by the Fed, which she admits is a bit of a mystery.  Interestingly though, one of the charts presented during Yellen’s speech (see below) shows the median PCE inflation projection by the FOMC is projected to return to the 2% level sometime in 2019.  There has been argument that the Fed should wait until inflation goes back up to 2% before hiking, but Yellen feels that would be "imprudent" as "monetary policy affects economic activity and inflation with a substantial lag."

The "Trump Bump" is seeing life again with the anticipating of tax reform. Actual "reform" might be light, but the highlights that the market is expecting are 1) lower corporate tax rate from 35% to something in the low 20 range,
2) immediate expense of capital expenditure, and 3) a one-time repartriation tax holiday for companies to bring back their money from overseas.  With another loss for the GOP over healthcare, the market is making bets that the party has a renewed focus and vigor to pass its tax plan.  

Strategy:  The long end of the bond curve is subject to geopolitical events.  D.C. has thus far disappointed since Trump has been in office, and the results have been lower yields.  If D.C. disappoints again, yields will likely retreat, making these levels look attractive.  If you have cash to put to work, this may be a good entry point as there is still a long period of debate before this plan gets voted on.

This information is intended for institutional investors only. The material provided in this document/presentation is for informational purposes only and is intended solely for private use. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instruments.

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