Leader Week in Review
March 20th, 2015
Economic Data Releases:
Weekly Market Action:
Treasury yields declined across the curve last week as investors digested another FOMC statement, press conference and dots chart (see chart 1). In the statement, the Fed removed the "patient" language, opening the possibility for a June increase in the Federal Funds Rate. At the same time, they took down their forward expectation for their future Fed Funds Rates implying that the pace of interest rate hikes would be slower than previous cycles. Treasury yields reacted by going lower with major flattening of the curve on the long end. Risk-markets also responded, with credit spreads tightening and oil prices rallying.
Despite the post-FOMC rally last week, energy sector credit spreads are markedly wider since the beginning of the month and roughly flat for the year. High yield credit energy spreads are at highs not seen since the last two recessions (see chart 2). Given that oil is no longer in free fall, this provides for attractive valuations if you can sort
out the baby from the bathwater.
Upcoming Economic Data Releases: