Market Commentary – 11/18/16

U.S. bonds continue to rip higher in response to the new Trump administration. Further adding fuel to the fire were comments made by Madam Chair Yellen which all but confirmed a December rate increase on short-term interest rates. Her reasoning was that by not raising rates now there is a fear that the Fed will need to raise rates rapidly in the future to fend off inflation.

While there are still many worries in the world, Trump’s message has pushed yields higher in the hopes of a better economy and less regulatory business environment. The jury is out on how this will unfold given that he doesn’t take office for another two months and new policies do take time to implement.

However, at the moment, the trend is not our friend, and interest rates, especially the long end of the bond curve, continue to march higher. We are biased toward locking in interest rates at this point, but do not see the 10-year Treasury Note rising above 2.500% in the near term, and we would not be surprised to see it settle in around 2.250% to 2.300%.