FDIC-Insured - Backed by the full faith and credit of the U.S. Government
FIXED INCOME
The fixed income markets continue to be volatile, but at the intermediate to long end of the curve. While the Fed has hinted at lowering rates, the evidence of when and how much continues to be the major discussion. Late in 2023 the Fed issued their “dot plots” (the expected path for rates) and targeted some 3 cuts in 2024. There was a major disagreement as the market had forecasted 6 – 7 cuts. Three months into 2024, both seem to have been way off. The Fed has an expectation of 0-2 cuts now, while the markets are betting on 1-3 cuts. This uncertainty has added to confusion and volatility in all markets. Numbers across the economy have been mixed while inflation remains sticky around the 3% level and job growth remains persistent (unemployment rate remains below 4%). The short end of the curve will not begin to move until the Fed starts to cut but the benchmark 10-year US Treasury continues to move based on those expectations for future cuts and more importantly the reasons for the cuts or the impact on the economy. The 10-year US Treasury closed the quarter with a 4.26% yield. In the last couple of days, it has even pushed slightly higher, putting it at levels we have not seen since late 2023. Where we go from here will be based on both the Federal Reserve and the economy, and their impact on each other.