More On US Interest Rates :

In past blogs I have talked about how the bond markets and the "yield curve" can give us some insight into how markets are building in expectations for the future (Feb 8 blog):

After the market has had time to digest the latest Federal Open Market Committee (FOMC) meeting minutes (see yesterday's blog for more on this), we have, subsequently seen some subtle shifts in the yield curve in the US, but lets look at what the "tea leaves" are suggesting:

(click on this chart to enlarge)

• The Fed's "patient" stance (for the timing on raising interest rates) has left shorter maturity dates on US Government Bonds pretty much unchanged.
• However this more "dovish" stance has created some concern about future inflation for bond investors in the longer dated maturities.
• As a result we are seeing a "steepening" of the yield curve, with bond investors demand higher yields for longer dated maturities to give them a cushion above their expectations of future inflation.
• We must, also keep in mind that the Fed is going to be "Data Dependant" for the timing on future interest rate moves.
• The economic data released this week was generally weaker than anticipated and inflation (at the producer level) was still below target.

Next week:

• home sales (new and existing)
• consumer confidence
• consumer price index
• durable goods orders

We and many others will all be watching developments in this data and making determinations about next steps for the Fed. 

Stay tuned!!

The views expressed are those of the author, Scott Tomenson, a Raymond James Financial Advisor, and not necessarily those of Raymond James Ltd. It is provided as a general source of information only and should not be considered to be personal investment advice or a solicitation to buy or sell securities. Investors considering any investment should consult with their Investment Advisor to ensure that it is suitable for the investor's circumstances and risk tolerance before making any investment decision. The information contained in this blog was obtained from sources believed to be reliable, however, we cannot represent that it is accurate or complete. Raymond James Ltd. is a member of the Canadian Investor Protection Fund.