Market expectations that interest rates will remain on hold following cautiously upbeat comments on ...
Market expectations that interest rates will remain on hold following cautiously upbeat comments on the US economy from Alan Greenspan, the Federal Reserve chairman, provide little direction for the bond market.
John McNeill, investment manager, fixed interest at Britannic, says following Greenspan's speech, the market now feels that interest rates will remain low in the foreseeable future.
McNeill said provided economic improvements continued and inflation remained low, there would be no pressure on the Fed to increase interest rates.
"However we expect that after we reach the mid point of the year, perhaps in the third quarter, that interest rates will be slightly increased from the current historically low levels," he said.
"If you believe interest rates are not going to rise then bonds are a buy, but at the moment there is little direction. It must also be remembered that much of the expectations are already priced into the market.
Greenspan announced that he believed the US economy was close to turning point, but added that a range of factors were moderating the speed of the recovery. The latest Fed forecast projected that the US could see growth of up to 3% this year.
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