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FOMC Meeting Pushes Yields Lower

Fixed income markets had another tumultuous week, although the driver this week was FOMC policy rather than the US-China trade situation.  As most expected, the Federal Reserve's Open Market Committee ended their meeting this week without a Fed funds target rate cut.  However, the language in the Committee's statement, in addition to comments from Chair Powell afterwards, pushed rates on the short end of the curve much lower. 

For the week, long-term yields declined by just a few bps, while one-two year yields declined by as much as 12 bps.  The rate declines in those tenors were caused by the market's belief that the Federal Reserve will cut their overnight target rate by at least 50 bps, and possibly 75 bps, by year-end.  Chair Powell seemed to tip his hand that he was among the eight Committee members who saw lower rates as likely, stating that, economic conditions "have called a number of us to write down rate cuts, and a number of those who haven’t to see that the case has strengthened."

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