Watch the Fed and the 10-Year Treasury. Expect Volatility.

December 15, 2014

Watch the Fed and the 10-Year Treasury. Expect Volatility. Photo

After the worst week for stocks since 2012, and oil falling below $60 a barrel, all eyes will be on this week's Fed meeting. The big question: Will the Fed will raise rates because of an improving U.S. economy, or wait due to falling inflation? While market experts seem to be split on where the Fed is headed, we expect the Fed to start preparing the market for a rate increase by June 2015..

Because this is the last full week of 2014, this should be the last week for active trading this year, so expect some volatility. Watch the 10-Year Treasury, as it approaches a key psychological level of 2.00%, to see if it can hold that level, or whether it breaks support and starts to trade toward the 1.86% intraday low. This would be a bearish signal for credit spreads and high yield bonds.

Tags: Monday Morning O'Malley | U.S. economy | High-Yield Bonds | Federal Reserve | Treasury | Volatility

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This blog post is for informational use only. The views expressed are those of the author, Dave O’Malley, and do not necessarily reflect the views of Penn Mutual Asset Management. This material is not intended to be relied upon as a forecast, research or investment advice, and it is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.

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High-Yield bonds are subject to greater fluctuations in value and risk of loss of income and principal. Investing in higher yielding, lower rated corporate bonds have a greater risk of price fluctuations and loss of principal and income than U.S. Treasury bonds and bills. Government securities offer a higher degree of safety and are guaranteed as to the timely payment of principal and interest if held to maturity.

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