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Managing Your Way In Fixed-Income When Bonds Slump 

February 10, 2014
David Thomas, Forbes

What will interest rates do?  The answer to that question is important to the U.S. economy, the equity markets and especially the fixed-income markets.  Many have a thoughtful hypothesis, but who can really forecast the future?

The members and staff of the Federal Open Market Committee should have an idea, since they are the group who actually make the decisions and set the short-term federal funds rate.

The median of the FOMC remains at 25 basis points for all of 2014, moving to 75 basis points for 2015, and out to 175 basis points for 2016 (although with a wide dispersion of opinions from 50 to 425 basis points).  The “longer run” which goes out past 2016 is a fairly tight consensus of a 400 basis point fed funds rate.

To further look into the future, we looked into the futures.  Futures contracts are the vehicles through which large sophisticated institutional investors are investing billions of dollars into future purchases of bonds one, three and five years into the future.  The results seem to concur with the opinions of the Federal Reserve Board members.

Read more: Forbes

 
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