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BNY Mellon Weekly Fixed Income Market Commentary - July 16, 2014
July 16, 2014
SOUNDING LIKE A BROKEN RECORD

At the risk of sounding like a broken record, we remain stubbornly range bound as the market continues to find a lack of meaningful catalyst to move it from the low volatility environment that we have found ourselves in for the better part of the last four to five months. Not that there have not been opportunities to change its view, from both a higher and lower rates perspective. More recently, we had a spate of much stronger than expected domestic economic data and possible contagion concerns emanating from the Portuguese banking system. While these events and other market murmurs have pushed yields to trade between 2.5% and 2.65% over the past few weeks, we remain largely within the range that has been in place since mid-April. Ultimately, the Fed's view has dictated market actions and, like good little soldiers, we are all following their orders. We ultimately found it comical to believe that Yellen would deviate from her highly crafted dovish message during this week's Congressional testimony and unfortunately found our views correct, even though we secretly hoped we were wrong. So while economic data continues to point to a possible earlier "lift off date" for rate hikes, the message remains that rates will stay "extraordinarily low for an extended period of time". The market has taken this message as gospel and we continue to have a flattening trade driven by underperformance at the short end and out performance at the long end. As the first chart below indicates, the two-year is the only maturity that has seen any significant volatility since the start of summer, with the rest of the curve mostly unchanged. So, while we have started to build in a mid-2015 rate increase, the futures markets continue to expect a much slower ramp period than even what the FOMC dots indicate, likely taking Yellen's voice as a super vote. Given that Yellen has stated that the Fed is comfortable reacting to data rather than proactively anticipating inflation, we may find ourselves in this range for a little while longer. This also is ultimately a concern that the Fed will find itself behind the 8-ball in the hiking camp, an especially challenging position given the size of its balance sheet and the significantly reduced market liquidity.

Investment Insights by Lockwood Advisors, Inc.
July 09, 2014
Second Quarter 2014
The second quarter of 2014 witnessed relatively strong market returns across both stock and bond asset classes. In the equity market, the S&P 500® Index, which is often used to represent the total U.S. equity market, returned 5.2%, as all 10 of its economic sectors posted positive returns. Among market capitalization ranges, according to the broadly encompassing suite of Russell U.S. indices, large-capitalization companies reported the largest quarterly return and, stylistically, returns favored value over growth in the small-mid capitalization ranges and growth favored value in the large-capitalization range.
BNY Mellon Economic Update
August 08, 2013
In his August 2013 Economic Update, BNY Mellon Chief Economist Dick Hoey states that he expects sustained global economic expansion, with a broad pattern of growth in both developed and emerging countries. From a longer-term perspective, emerging countries have a higher trend growth rate than developed countries, due to continued diffusion of modern technologies and the long-term uptrend in the productivity of their labor force. Cyclically, however, the countries with the best prospects for a near-term improvement in economic growth are the developed countries, as they recover from depressed levels of economic activity in response to easy monetary policy.
Capital Markets Brief: Smoothing Out the Journey of Investing by Lockwood Advisors, Inc. - June 2011
June 10, 2011
Has diversification failed investors? And is there a right time to invest? The financial and real estate market crises that began in 2007 and the rapid equity market rise since early 2009 have left some advisors and investors wondering if the time-honored principles of portfolio diversification and the importance of proper asset allocation no longer apply. Chasing recent, strong-performing asset classes or strategies may be tempting to investors; but, unfortunately, it is often a detrimental strategy. The variability of returns among different asset classes poses difficulties in asset allocation. We believe within this variability lies the investor's greatest opportunity.
Retirement Income Strategies in a Difficult Environment
April 21, 2011

The financial challenge facing retirees today is unlike anything they have ever experienced before. A recent survey conducted by The Harris Poll found that, of 2,151 respondents, 34% of Americans have no retirement savings and 27% have no personal savings. This situation requires financial professionals to find new and innovative ways to address the retirement shortfall. As with any challenge, we are often forced to confront long-held basic assumptions and turn them on their heads.

Fixed Income Commentary, December 10, 2010
December 10, 2010
Taxes took center stage this week, as President Obama announced a tax compromise that would extend the Bush tax cuts for all, while also providing fairly favorable treatment of capital gains, dividends and the estate tax. In exchange, unemployment benefits would be extended for an additional year, while a surprise reduction in the payroll tax could potentially add up to 0.7% to GDP next year.
Fixed Income Commentary, December 3, 2010
December 03, 2010
Stocks and bonds gyrated this week on growing and then waning concerns over the viability of the European Common Union. Investors had not taken kindly to the details of the Irish bailout plan announced last week. Of primary concern was the belief that the plan would do little to stop deteriorating conditions in other periphery nations.
Fixed Income Commentary, November 19, 2010
November 19, 2010
Fixed income markets were generally weaker, as questions about the efficacy and longevity of QE2 are debated in the market. Treasuries yields were mostly higher by week's end, although they were stronger from the lows put in at the start of the week. The municipal market continued to struggle through another week of mountainous supply.
Capital Markets Brief: Are We There Yet? by Lockwood Advisors, Inc. - November 2010
November 19, 2010
On September 20, 2010, the National Bureau of Economic Research (NBER) made the announcement that it has determined an official end to the nation's most recent recessionary period. The NBER concluded that the recession, which began in December 2007, had actually culminated fourteen months ago in June 2009. And, while the U.S. stock markets treated the news with a favorable reception, the declaration left many pondering the relevancy of what may be a stale conclusion. At present, there are numerous indications that the U.S. economy is not functioning particularly robustly, and many may wonder exactly how it was reasoned that the recession ended over a year ago.
Fixed Income Commentary, November 12, 2010
November 12, 2010
As the markets continued to digest the impact of QE2, volatility picked up, with a slight move away from risk assets. Stocks retreated after returning to pre-Lehman levels last week. Treasury prices were lower on the week on weak auctions and a potential rethinking of the post QE2 trade.
Fixed Income Commentary, November 5, 2010
November 05, 2010
The Fed launched the much anticipated QE2 this week, announcing a $600 billion asset purchase program to be executed over an eight-month period. The $75 billion in monthly purchases will focus on the 5- to 7- year part of the curve, and had far less long bonds than many investors expected.
Fixed Income Commentary, October 29, 2010
October 29, 2010
This week's activity was dominated by expectations of next week's major events, mainly the elections and the Fed meeting. It is widely anticipated that the Republican party will control the House, with an outside chance of a Senate victory also.
Fixed Income Commentary, October 22, 2010
October 22, 2010
The markets continue to be dominated by the prospects of QE2, with investors remaining patient with their allocation to risk. Stocks were the biggest beneficiaries this week, as bonds were generally range bound to slightly weaker.
Fixed Income Commentary, October 15, 2010
October 15, 2010
The markets were dominated by foreclosure news, a weak dollar and strong corporate earnings during the week. The first two halted the multi-month rally in the bond markets, while the latter allowed stocks to post a positive week despite the first two items.
Fixed Income Commentary, October 8, 2010
October 08, 2010
The Friday, October 8 employment report posted a large headline miss, with payrolls contracting by 95,000 versus a flat expectation. The employment rate held steady at 9.6%, while the underemployment rate crept up to 17.1%. While in prior quarters, this miss would have caused a flight out of risk assets, it solidified the belief that the Fed would move forward on QE2 in the near term.
Fixed Income Commentary, October 1, 2010
October 01, 2010
Stocks posted their strongest September since 1939. The risk trade was in full force during the month, with "Don't Fight the Fed" being the rallying cry. While we worry about the complacency in the market that governments have the will and wherewithal to take care of global financial problems, the momentum is strongly in favor of risk.
Fixed Income Commentary, September 24, 2010
September 24, 2010
The Federal Reserve kept rates unchanged this week, although its policy statement indicated that it would launch QE2 if it felt the economy was faltering. As the purchase of treasuries would have a prominent role in QE2, government bonds rallied near the year's low yields and the 10-year closed at 2.55% mid-week.
Fixed Income Commentary, September 17, 2010
September 17, 2010
Economic and corporate data continue to be mixed, consistent with slow growth, but absent indications of a double dip or deflationary pressures. Fixed income seems to be adjusting to this slow growth -- low rate reality, and fund flows continue to strongly favor bonds over U.S. equities.
Capital Markets Brief: A Tale of Two Currencies by Lockwood Advisors, Inc. - August 2010
August 23, 2010
Nothing seems to rattle the U.S.financial markets quite like the periodic rumblings of currency adjustment that come from China.
Gain Insights on the Industry
May 23, 2008
Explore industry trends and best practices from marketing to back-office operations that could directly impact your firm in our newsletter, Practice Point.
BNY Mellon Global Markets, LLC Weekly Market Commentary - TEST
 

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