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Weakness in Equities Leads to Lower Yields

Rates resumed their downward trajectory this week as declines were initially driven by continued weakness in equities.  U.S. stocks are now set to register an annual decline for the first time since 2008.  Wednesday's FOMC meeting delivered almost exactly what the market was expecting, lifting the Fed funds rate target for a fourth time this year and lowering their 2019 rate forecast.  Nevertheless, stocks fell as investors expected the Fed to be more dovish. 

Chair Powell did indicate flexibility regarding future Fed policy, as lower than targeted inflation "gives the committee the ability to be patient moving forward."   The focus on stocks and the Fed switched gears towards the end of the week, as the possibility of a government shutdown drew investors' attention.  Finally, Friday's November's personal spending data release reinforced bullish holiday spending projections, as incomes rose more than expected and October's data was revised upwards.

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