The RateWatch
 Commentary by Bill Brizendine of Melody Capital MarketsThe Fed, as expected, left interest rates alone last week (although one maverick governor saw fit to write a dissent – must think he’s a Supreme). 10-year Treasury yields did not react too much in the immediate aftermath of the announcement, dropping a measly 1 bp on Wednesday. On Thursday and Friday, however, a rise in first-time unemployment claims, continuing weakness in the housing market and other signs of a slowing economy fueled a rally. By the end of the week 10-year yields had fallen to 4.59%, down 20 bps week-to-week. The “delayed” rally seemed to be a result of capital flows from equities when, after the initial euphoria at interest rate stability, the slowing economy started to make investors nervous. The 10-year UST rally has continued into early afternoon trading today with the yield dropping another 5+ bps. Some are beginning to forecast a rate cut by the Fed at its October meeting. We think there will have to be a sustained reduction in core inflation rates before that will happen, which puts any rate cut into to next year at the earliest. Attached to today’s RateWatch is another edition of Bloomberg’s Capital Markets Treasury Forecast. The survey was conducted a couple of weeks ago; with a current 10-year yield at 4.54%, below everybody’s 3rd quarter estimate, we suspect it would be different if it were conducted today. Download The RateWatch: A one-page analysis of institutional lending rates Bloomberg’s Capital Markets Treasury Forecast |