Wednesday, January 3, 2018
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 • Chuck Honeywell

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
12/22/17	1.15	1.33	1.54	1.73	1.91	2.01	2.26	2.40	2.48	2.68	2.83
12/26/17	1.24	1.47	1.52	1.75	1.92	2.02	2.25	2.38	2.47	2.66	2.82
12/27/17	1.18	1.44	1.53	1.75	1.89	1.99	2.22	2.34	2.42	2.59	2.75
12/28/17	1.19	1.39	1.54	1.76	1.91	2.00	2.23	2.36	2.43	2.60	2.75
12/29/17	1.28	1.39	1.53	1.76	1.89	1.98	2.20	2.33	2.40	2.58	2.74
1/2/18	1.29	1.44	1.61	1.83	1.92	2.01	2.25	2.38	2.46	2.64	2.81

                                                                                       Source: U.S. Department of the Treasury, as of 1/2/18  

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The Foreseeable Future …?

The Bloomberg table below shows actual economic data dating back to 2010, as well as current forecasts from major economists for 2018 and 2019.

Although GDP (YoY%) is projected to grow 2.6% this year, up from 2.3% last year, growth is expected to slow in 2019 with an expansion of only 2.2%. 

Nonetheless, the rate of unemployment is projected to continue declining from 4.4% last year, to 4% this year, and 3.8% next year.

Inflation, as measured by the Core PCE (YoY%) is expected to continue inching ahead, increasing from 1.5% in 2017, to 1.7% in 2018, and 2.0% in 2019, finally achieving the Fed’s inflation goal.  

Regarding interest rate projections, the FOMC is expected to increase its overnight target rate three (3) times in 2018, ending the year at 2.25%.

Although the target rate is expected to increase +75 bps in the year ahead, the average forecast (of 57 economists) for both 2-year and 10-year USTNs is projected to increase +42 bps from current levels. 

Relative to overnight rates, the curve is expected to further flatten.  However, the benchmark yield curve, as measured by the difference between 2-year and 10-year notes, is officially expected to maintain its current slope of +54 bps. 

Source:  Bloomberg 1/3/18

                                

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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