| Thursday, February 20, 2020 |
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| MANAGING DIRECTOR: Scott Carrithers PORTFOLIO SALES AND SERVICE: Steve Panknin • George Morris • Jeff Goble • Chris Thompson • Sean Doherty 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 |
| 02/12/20 | 1.57 | 1.58 | 1.56 | 1.49 | 1.44 | 1.42 | 1.45 | 1.55 | 1.62 | 1.93 | 2.09 |
| 02/13/20 | 1.59 | 1.59 | 1.56 | 1.48 | 1.44 | 1.42 | 1.43 | 1.53 | 1.61 | 1.91 | 2.07 |
| 02/14/20 | 1.60 | 1.58 | 1.56 | 1.49 | 1.42 | 1.40 | 1.42 | 1.51 | 1.59 | 1.89 | 2.04 |
| 02/18/20 | 1.61 | 1.58 | 1.56 | 1.47 | 1.41 | 1.37 | 1.39 | 1.48 | 1.55 | 1.85 | 2.00 |
| 02/19/20 | 1.61 | 1.58 | 1.56 | 1.47 | 1.42 | 1.39 | 1.41 | 1.50 | 1.56 | 1.86 | 2.01 |
Looking to the Futures
As was noted in yesterday’s Portfolio Manager’s Report, the latest Bloomberg Economic Survey (a survey of 71 noted economists) forecasts no move in the FED funds rate (currently in a range of 1.50% - 1.75%) all the way through the second quarter of 2022. This forecast contrasts dramatically with the projections of the FED funds futures market however.
Certainly no one knows for sure what the FED’s policy path will be for the rest of the year as the FOMC remains on a “data dependent” approach. The FED funds futures market, however, provides us with an educated guess.
Shown below is the remainder of the FOMC calendar for 2020. As you can see, the market is anticipating the next FED move to be lower and possibly as soon as the June meeting. Fast forward to December and the market sees an 83.2% chance of at least one FED cut including a forward rate of 1.20%.
As was noted in yesterday’s Portfolio Manager’s Report, the latest Bloomberg Economic Survey (a survey of 71 noted economists) forecasts no move in the FED funds rate (currently in a range of 1.50% - 1.75%) all the way through the second quarter of 2022. This forecast contrasts dramatically with the projections of the FED funds futures market however.
Certainly no one knows for sure what the FED’s policy path will be for the rest of the year as the FOMC remains on a “data dependent” approach. The FED funds futures market, however, provides us with an educated guess.
Shown below is the remainder of the FOMC calendar for 2020. As you can see, the market is anticipating the next FED move to be lower and possibly as soon as the June meeting. Fast forward to December and the market sees an 83.2% chance of at least one FED cut including a forward rate of 1.20%.
Source: Bloomberg L.P.
As always, plan your work and work your plan… and trust the market over economists.
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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