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Markets Stable After Fed Passes On Rate Hike

Fixed income markets ended the week little changed, as a mid-week surge in yields was reversed by Friday.  The ten-year note briefly breached the 3.00% barrier on Wednesday following the Treasury's announcement that a larger deficit will require an increase in Treasury bond sales at the next auction.  A federal budget shortfall of $800 billion is expected this year, with a $1 trillion deficit expected in 2020. 

Also on Wednesday, the Federal Reserve announced their widely expected decision to keep their target overnight rate unchanged.  The statement accompanying the decision reflected the FOMC's bullish view of the economy, supporting the market's expectation for another 25 bp rate hike at their next meeting in September. 

The monthly employment report released on Friday wasn't quite as strong as predicted; however, upward revisions to prior months offset the lower than expected 157,000 job increase - that increase was sufficient to push the unemployment rate down to 3.9%.

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