Investor Access

Tempus Advisors | Raymond James

Keeping you informed regarding all financial matters

Fixed Income Market Commentary by Kevin Giddis

September 25, 2018

The Treasury market is trading slightly lower this morning as higher yields are becoming more of the “norm” vs. just another uncomfortable short-term event. Yesterday’s 2-year note auction is a microcosm of what looks to be a longer than expected move to higher rates. When you get the worst coverage ratio since December of 2016 (2.44 times), and only a moderate indirect bid (40%), it starts to take its toll on the longs. Today the Treasury will sell $38 billion of 5-year notes and tomorrow $31 billion of 7-year notes. At some level, maybe it’s here or maybe it’s not, buyers will step in. So we may get an upside surprise from either of these auctions. The market’s focus now turns to the Fed. The FOMC meets tomorrow and they are widely expected to raise rates. The more interesting part of the meeting will likely come afterwards when the Fed Chair makes his comments. In those comments will probably be the information that traders need most, and that is how the committee feels about the forward view of interest rates. The burning question will be: will the Fed raise rates in December and how many times will they potentially raise rates in 2019? Beyond the Fed, the markets next response will likely come from…the data. Most of the key economic numbers come after the FOMC meeting, and there are a couple of them that could impact the volume and likely the volatility of the next trade. Those are Personal Income/Spending and the Core PCE on Thursday. For the bond market, the centerpiece to the future of rates trading remains with the level of inflation. If the data doesn’t support an upward trend, then long rates could fall back by 5-10 basis points. Conversely, if the trend is confirmed, then don’t be surprised to see a move towards 3.25% in the 10-year note. While the signs continue to point to sustained economic growth, rising or plateauing costs are likely the Pandora’s Box of what happens next in the wonderful world of fixed income investing!

The information contained herein is based on sources which we believe reliable but is not guaranteed by us and is not to be considered all inclusive. It is not to be construed as an offer or the solicitation of an offer to sell or buy the securities herein mentioned. This firm and/or its affiliates and/or individual shareholders and/or members of their families may have a position in the securities mentioned and may make purchases and/or sales of these securities from time to time in the open market or otherwise. Opinions expressed are our present opinions only and are subject to change without notice. Raymond James may also perform or seek to perform investment banking for entities referred to herein

115 E. Putnam Ave, 3rd Floor| Greenwich, Connecticut 06830 | T: 203.900.4403 | F: 212.818.1115 | Map & Directions

570 Lexington Avenue, Suite 1600 | New York, New York 10022 | T: 212.818.1300 | F: 212.818.1115 | Map & Directions

Latitude One, 175 Southwest 7th Street, Suite 1900 | Miami, Florida 33130 | T: 305.529.6287 | F: 786.837.0465 | Map & Directions

Securities offered through Raymond James Financial Services, Inc., member FINRA / SIPC. Investment advisory services offered through Raymond James Financial Services Advisors, Inc. Tempus Advisors is not a registered broker/dealer, and is independent of Raymond James Financial Services. Raymond James financial advisors may only conduct business with residents of the states and/or jurisdictions for which they are properly registered. Therefore, a response to a request for information may be delayed. Please note that not all of the investments and services mentioned are available in every state. Investors outside of the United States are subject to securities and tax regulations within their applicable jurisdictions that are not addressed on this site. Contact our office for information and availability.

© Raymond James Financial Services, Inc., member FINRA / SIPC | Privacy Policy | ADV Part 2A | ADV Part 2B

Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members.