Central Banks Take Center Stage

July 30, 2018

Central Banks Take Center Stage Photo

The week ahead will be very eventful for the fixed income markets as the Federal Reserve (Fed), Bank of Japan (BOJ) and Bank of England all meet. On Friday, the market will receive another key piece of economic data with the release of the July employment report, which is expected to remain strong. In the wake of last week’s 4.1% Gross Domestic Product growth, fixed income investors will be watching this week’s events closely.

One thing to look for with the Central Bank meetings is if the BOJ will amend its current bond buying program. With 10-year Japanese Government Bonds (JGBs) trading around 10 basis points (bps), investors question whether the BOJ will officially move off of its negative interest rate policy. A likely occurrence is the Bank of England raising its benchmark rate by 25 bps to 0.75%, the first increase since last November. Additionally, look for any signal from the Fed that indicates whether one or two more interest rate hikes are coming this year. No action is expected at this meeting; however, the statement will most likely provide clues regarding the possibility of a September rate increase. 

I expect bond yields to push higher globally as economic conditions remain favorable and inflation edges higher. I continue to remain cautious about equities coming off Facebook’s large drop in share prices last week.

Tags: Federal Reserve | Central banks | Bond yields | GDP

< Go to Monday Morning Perspectives

This blog post is for informational use only. The views expressed are those of the author(s), 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.

Any statements about financial and company performance of The Penn Mutual Life Insurance Company or its insurance subsidiaries (each, “Client”) made by the author is provided with a written consent from the Client.  Penn Mutual Asset Management is a wholly owned subsidiary of The Penn Mutual Life Insurance Company.

Opinions and statements of financial market trends that are based on current market conditions constitute judgment of the author and are subject to change without notice.  The information and opinions contained in this material are derived from sources deemed to be reliable but should not be assumed to be accurate or complete.  Statements that reflect projections or expectations of future financial or economic performance of the markets may be considered forward-looking statements.  Actual results may differ significantly.  Any forecasts contained in this material are based on various estimates and assumptions, and there can be no assurance that such estimates or assumptions will prove accurate.

Investing involves risk, including possible loss of principal.  Past performance is no guarantee of future results.  All information referenced in preparation of this material has been obtained from sources believed to be reliable, but accuracy and completeness are not guaranteed. There is no representation or warranty as to the accuracy of the information and Penn Mutual Asset Management shall have no liability for decisions based upon such information.

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.

All trademarks are the property of their respective owners. This material may not be reproduced in whole or in part in any form, or referred to in any other publication, without express written permission.

Subscribe to Our Publications