Bond markets are now only expecting a single rise in rates by the end of 2016 and even that move is not entirely factored in. We are at one with the consensus market view and believe Janet Yellen will not risk surprising the markets by raising rates this week; we think she will hold fire until December's meeting.
Nevertheless, the Fed is likely to highlight the buoyant state of the jobs market as well as a moderate increase in inflation. This is why we at Edmond de Rothschild Asset Management are still cautious on the US yield curve, especially at the short end where a gradual rise in benchmark rates has still not been fully priced in. At the same time, we are positive on inflation-linked bonds as they could rebound if the Fed were to delay raising rates.
Written on 20/09/2016. Non-binding document. This document is for information only.
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