Today ends the two day policy meeting by the Federal Reserve and the results are expected in at roughly 2pm this afternoon. There has been much speculation as to when the Fed will start raising short term interest rates. Some say 2nd quarter 2015, and some say 1st quarter 2015. The bottom line is interest rates are going to go up next year.
What we need to expect is the Bond market reaction. Last year, when then Fed Chair Ben Bernanke telegraphed the ending of QE 3 ½, the fixed income markets sold off (rates rose) into the end of 2013. The Fed will not want a repeat performance, so we expect the “dovish” language to be changed slightly towards an interest rate rise. This will temper the market response, but we still expect a negative reaction in the fixed income markets. The fed is walking a fine line, but the one thing you can count on is that interest rates are going up, and it is coming relatively soon.
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