Published Wed, 28 Dec 2016 06:51:58 -0500 on Seeking Alpha
We are in the last week of 2016 and it's time to see how every asset class has performed this year. In this regard, let's take a look at how the bond market has fared in 2016.
Flashback of 2016
The start of 2016 was in fact awesome for the fixed-income market as China-led global market worries, the 12-year plunge in oil prices and loss of momentum even in the otherwise-improving U.S. economy stirred up global market quandaries and people rushed to safe refuge bond ETFs.
The impact of the global financial market turmoil was so deep-rooted that the Fed could not enact more than one hike this year. Plus, Brexit or Britain's decision to cut ties with the European Union (EU) through a referendum arranged on June 23 dealt a blow to risky investing which is why yields on the benchmark 10-year U.S. Treasury notes slumped to record lows in early July.
In such a scenario, Trump's victory and his vows to cut taxes and boost fiscal spending raised inflation expectations, pushing bond yields higher. Speculation is rife that business investments will get a new lifeline now. Also, the OPEC oil output cut deal played a role in pushing inflation higher. The Fed has now forecast three rate hikes in 2017, up from two guided in September.
The notable changes were in the projection for the benchmark interest rate for 2017, 2018 and 2019. Projections for 2017, 2018 and 2019 were ticked up from 1.1% to 1.4%, 1.9% to 2.1% and from 2.6% to 2.9%, respectively. These are... Read more