Dove

Content provided by Josh Jenkins, CLS Research/Portfolio Analyst

For the first time since March, the bond market was not sent into a tailspin upon the release of the FOMC meeting statement. After each statement released between the April and July FOMC meetings, the 10 year Treasury yield jumped at least 10 basis points over the following week.

The statement released by the Fed on July 31 was considered to have a more dovish tone than recent communications. Among other things, changes since June include commentary on rising mortgage rates, the risk posed by “inflation persistently below its 2 percent objective,” and economic data that suggests the economy expanded at a modest pace during the first half of the year. In addition, the committee “reaffirmed its view that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends.”

It is also interesting to note that prior to the statement release on July 31, the Treasury market was getting hammered on the release of some positive economic data. The 10 year yield had reached as high as 2.70 percent before closing the day at 2.57 percent.

CLS began preparing for a backup in rates earlier this year by positioning the portfolios to be less sensitive to increases. Even though we did not see another rate spike at the end of July like we had after previous communications were released by the Fed, many economist still expect rates to continue to march higher and our portfolios will be positioned for this.

 

 

 

 

This information is prepared for general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. You should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. You should note that security values may fluctuate and that each security’s price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not a guide to future performance.
1667-CLS-08/14/2013