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Yields Reverse Gains as Geopolitical Concerns Weigh

Yields reversed all of last weeks advances and more, with both the five- and ten-year Treasury notes declining by 13 bps.  The sizable declines in yield were primarily attributable to the "will-they, won't they" summit negotiations as inflamed rhetoric led to the likely cancellation of the planned meeting.  The geopolitical drama overshadowed the week's economic releases  as well as the FOMC's May meeting, which concluded on Wednesday.  While April housing sales disappointed, the miss was not due to a lack of demand for homes, but rather the low inventory of homes available for sale. 

Wednesday's FOMC meeting ended as expected, with the Fed funds target remaining unchanged at 1.50-1.75%.  The statement accompanying the decision all but guaranteed a 25 bp rate hike at their next meeting in June, saying that "it would likely soon be appropriate" to increase the benchmark policy rate.

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