Against the Odds, Another Positive Month for Bonds
Interest rates in December paid little attention to core economic trends, most of which were quite strong. But, data could not reach the ‘very’ strong level necessary to bear steepen the yield curve. The Fed appears on a steady course through the first half of 2018 with at least two rate hikes baked into December’s interest rates. The month was defined instead by i) tax reform and its ability to send stock prices significantly higher; ii) a turn in the Mueller investigation that accelerated curve flattening; and iii) an earlier than usual year-end close for many portfolios that concentrated resources on how the tax law might change the 2018 outlook. With the unusual exception of December 1, it was easily the slowest trading month of 2017.