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| Bonds Online |
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| 5/10/2013Market Performance |
| Municipal Bonds |
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S&P National Bond Index
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3.00% |
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S&P California Bond Index
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2.96% |
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S&P New York Bond Index
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3.13% |
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S&P National 0-5 Year Municipal Bond Index
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0.70% |
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| S&P/BGCantor US Treasury Bond |
400.09 |
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| Income Equities: |
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| Preferred Stocks |
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S&P U.S. Preferred Stock Index
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848.03 |
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S&P U.S. Preferred Stock Index (CAD)
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636.26 |
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S&P U.S. Preferred Stock Index (TR)
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1,701.05 |
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S&P U.S. Preferred Stock Index (TR) (CAD)
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1,276.26 |
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| REITs |
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S&P REIT Index
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174.07 |
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S&P REIT Index (TR)
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425.30 |
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| MLPs |
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S&P MLP Index
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2,469.58 |
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S&P MLP Index (TR)
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5,428.50 |
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See Data
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Fed Maintains its Flexibility: The bond market is behaving as if we are headed for slower growth and deflation |
May 1, 2013, D.A. Davidson Capital Markets Commentary
The following is an excerpt of comments prepared by the author. There has been much speculation that the Committee is considering an exit strategy by the end of this year. To that point, the Committee noted for the first time that they are prepared to “increase or reduce the pace of its purchases” as the outlook for inflation or employment changes.
The Federal Open Market Committee (FOMC) concluded a two-day meeting this afternoon. As expected, there was no policy changes announced and one dissenting vote from Kansas City Fed President Esther George. The Committee commented on the recent deceleration in inflation and persistently high unemployment rate. The dual mandates of stable prices and full employment have clearly not been met and as a result, the belief is that the Committee will not reduce the bond purchase program announced in September 2012 or establish an end date for the program anytime soon.
The written announcement following the meeting stressed the Committee’s desire to keep longer-term interest rates low to support economic growth. The Committee noted that fiscal policy is restraining growth and they see “downside risks to the economic outlook.” The inflation expectation is that the rate will “run at or below its 2 percent objective.” As noted earlier, Esther George disagreed with the Committee’s decision to maintain current policy citing the high level of policy accommodation may cause financial imbalances that could lead to an increase in long-term inflation. In response to the slow growth and low inflation projections, the Fed will continue to purchase an additional $45 billion in Treasury securities and $40 billion in agency debt and mortgage-backed securities per month to exert downward pressure on longer to rates and “support mortgage markets.”
There has been much speculation that the Committee is considering an exit strategy by the end of this year. To that point, the Committee noted for the first time that they are prepared to “increase or reduce the pace of its purchases” as the outlook for inflation or employment changes. In other words, monetary policy will be flexible and reactive to any significant events that could cause price increases or higher unemployment rates. We believe the Committee will vigilantly monitor and consider both domestic and foreign economic developments in the development of future policies.
The impact of fiscal spending cuts is just beginning to surface in the consumer’s pocket books and [the bond markets] believe the risks to the economy are on the downside. The bond market is behaving as if we are headed for slower growth and deflation as evident by a slide in the yield on the 10-year note to 1.63 percent. A move toward 1.50 percent is still a great possibility in the coming month and [the bank] suggests investors position accordingly by investing when rates move toward 1.80 percent during this quarter. Yield buyers will be rewarded in mortgage securities, which have widened the past week and other structure debt.
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| Stuff to look at |
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S&P Commentary and Newsletters: S&P
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| BondsOnline Advisor |
Income Security Recommendation January 2013 Issue.
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