Birds: Dove or Hawk?

Fed Statement may be dovish, may be hawkish, may be neutral.  Treasury Yields continue to fall.  Greece “containment”?  The Fed’s first 2015 meeting and subsequent statement seemed to indicate that they are still on schedule to raise rates later this year.  The statement referenced “solid” growth and “strong” job gains (even after Monday’s surprisingly negative US Manufacturing Report).  However, market watchers feel that the raising may come in the fall and not mid-year as consensus forecasted last month.  Treasury yields continued to drop, the 10 year closed at 1.72% today, its lowest level since May 2013.  The 30 year is at an all-time low of 2.29%.  The bond yields are hitting key technical levels, so we are in uncharted territory.  The Fed referred to inflation factors such as plunging oil prices as “transitory” (what do they know that we don’t?).  It will be hard to raise rates if anything like deflation is on the horizon.  European yields are still very low in the wake of the ECB’s bigger than expected and semi open ended stimulus announcement last week.  German 10 year yield is 0.35% but developments in Greece are pushing Italian and Spanish yields up slightly.  The hope is that Greece’s potential challenges can be contained, that “firewall” measures put into place since the last Greek crisis are enough to prevent  contagion to other potentially unstable southern European economies.  Meanwhile US real estate lenders are still trying to figure out floors.  CMBS lenders are still close to 4.00% on full leverage, but pricing lower leverage in the mid 3’s…. with life companies going to 3.50% and below for very low leverage on high quality assets …stay tuned…  David R. Pascale, Jr.