Leader Week in Review - June 19th, 2015
Economic Data Releases:
Treasury yields declined across the curve last week as investors flocked to “safe haven” assets with the continued drama in Greece providing the bid. MBS spreads tightened while Credit spreads widened. Investors have been unloading Credit over the last week – according to UBS and Lipper, $161 million has come out of Investment Grade mutual funds and $2.9 billion has exited High Yield funds for the week ending June 17th.
The main event for the week was the FOMC meeting. Nothing was expected in terms of rate changes, with the focus instead on the “dots” to infer when the Fed might raise rates (chart 1). The Fed left the 2015 year-end rate estimate alone at 0.625% (inferring 2 rate hikes before year end) while dropping longer term rate estimates. Financial markets are pricing in a single rate hike however, with Fed Fund Futures at 0.375%. A September rate hike appears to be in the bag with more recent inflation running above the Fed target (chart 2) and investor focus will now turn to the pace of rate hikes.
Upcoming Economic Data Releases: