Treasuries rallied significantly on today’s dovish Fed statement and press conference by Fed Chairwoman Yellen. The “Dot Plot”, which indicates expectations of future rate hikes, was dialed down from 4 raises in 2016 (December dot plot) to 2 raises this year. The eventual “normal” rate (end of 2018 approx) was adjusted down to 3.25% from 3.50% (today’s rate being 0.25%). Futures markets and consensus among economists indicate the next raise will occur after the June meeting, not April. There will be a press conference after the June meeting and Yellen will probably want to communicate some detail and nuance. There was some divergence among members over inflation, with some lowering expectations and Vice Chair Fischer seeing “stirrings” of increased inflation. The Fed also slightly lowered projections for this year’s economic growth due to volatile market conditions. The 10 year hit 2.00% before the announcement and dropped to 1.91% post announcement. The 2 year T yield had its biggest drop since Sept 2015. Stay Tuned. David R. Pascale, Jr.
