Economy

Why bond ETFs surged despite Fed rate hike

Why bond ETFs surged despite Fed rate hike”

In a separate report, the department announced that US import prices declined 0.3 percent in May after increasing 0.2 percent in April, while the price index for USA exports declined 0.7 percent in May following a 0.2-percent advance in April.

The Dow Jones industrial average was up 22 points, or 0.1 percent, to 21,352, little changed from before the announcement.

In her post-meeting press conference, the Federal Reserve's chairperson, Janet Yellen, warned that the Fed could implement its balance sheet unwinding process soon if the economy continues to perform as expected. This has in turn given the Fed the confidence to start selling off part of the more than $4.5 trillion of holdings that it amassed at the time of and following the recession.

Analysts in recent weeks have become increasingly doubtful there would be a third rate increase later this year, as inflation, consumption and other economic data have indicated the weakness seen in the first quarter has continued.

"The growth of the balance sheet was an unprecedented experiment so the reduction of the balance sheet is going to be the flip side of that same coin", the budget director said.

The interesting point of announcing this carefully constructed plan now is that, should Yellen's four-year term that ends on February 3, 2018 not be renewed, then the next Fed Chair will struggle against the constrains of the program and find it hard to change the plan.

What could this mean for markets and thus investors?

Mulvaney said the administration did not factor the Fed's balance sheet intentions into Trump's proposed budget.

More news: Laredo Petroleum, Inc. (LPI) Given Underperform Rating at Credit Suisse Group

After having gained strong support after the weak USA data, gold hit resistance close to $1,280 and fell sharply to lows below $1,260.

The rate hike should not come as a surprise for investors on Wall Street.

Yes, a complex situation is coming our way.

The Federal Reserve was able to modestly raise rates because of the U.S. economy's relatively strong performance, in comparison with the U.S. or Europe.

In currency markets, the dollar is up to 110.22 yen from Tuesday's 110.04 yen. In fact, in the Summary Economic Projections that accompanied the interest rate decision, the Fed's median forecast for GDP growth for 2017 actually ticked higher, up to 2.2%, from 2.1% in March.

The 10-year Treasury note TMUBMUSD10Y, +1.39% ticked up 1.1 basis point to 2.149% point, compared with 2.138% late Wednesday in NY, which marked the lowest yield for the benchmark note since November 10.

Prices surged early Wednesday after a report showed the consumer-price index fell to 1.9% on an annualized basis in May from 2.2% the previous month.



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