Yellen Signals Rate Rise in US

US government bond rates moved higher last week after Federal Reserve Board Chair Janet Yellen's speech on Friday

Robert Johnson, CFA 29 August, 2016 | 4:20PM
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Stock markets held up better than we might have expected last week given the continued hawkish tone from Federal Reserve governors and weaker oil prices. In the past, either of these would generally have been enough to sink world markets. But last week, U.S. and European markets were each down less than 1%, and emerging markets fared slightly worse, falling over 2%.

Commodities were down on higher oil inventory and lack of any production agreement among major producers. A stronger dollar on Friday really did not help matters. Interest rates were up, and bonds were down for the week. The 10-year U.S. Treasury bond yield increased to 1.63% from 1.59% for the week, with rates moving higher after Federal Reserve Board Chair Janet Yellen's speech on Friday along with another governor's comments that there could still be as many as two rate hikes this year.

US Rate Rise: Yellen Guarantees Nothing

Not much really mattered this week except the expected speeches out of Jackson Hole, Wyoming, where the Fed governors were attending the annual economics symposium sponsored by the Federal Reserve Bank of Kansas City. The comments coming out of the meeting were a bit more hawkish than expected. But even the hawks noted that their decisions would continue to be data-driven and that nothing was guaranteed.

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About Author

Robert Johnson, CFA  is director of economic analysis with Morningstar.

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