This week it was all about the Fed and the Fed commentary that took place Wednesday. The Federal Reserve signaled that it remains on track to raise rates later this year. The big dilemma within the Fed is when to raise rates as raising rates too early will derail the anemic U.S. recovery, while moving too late will cause inflation to overshoot. U.S. bonds responded positively to the prepared remarks by the Fed on how the Fed is prepared to lift rates from near zero.
Internationally, Greece remains front page news with The Bank of Greece requesting 3.3 billion euro of emergency funding to backstop capital in the Greek banking system after big withdrawals. A Greek default remains a real possibility, and this “cat and mouse” game between Greece and the European Central Bank has driven U.S. bonds lower with the U.S. 10-year yielding around 2.280%.
While bonds are rallying Friday morning, we continue to remain biased toward locking in rates due to the potential for a Greek resolution early next week which would settle down the bond markets.
On a separate note, the long awaited rollout for the Consumer Financial Protection Bureau’s (CFPB) TILA-RESPA Integrated Disclosure rule will now be delayed until October 1st. The CFPB said that an administrative error occurred, which is holding up the new rule, originally planned to go into effect on August 1st.