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FOMC Year-End Market Update

Last week, the FOMC (Federal Open Market Committee) had their last meeting of 2019. This regulatory group meets in Washington D.C. once every six weeks to discuss interest rates and the growth of the U.S. money supply.

What does this mean for you?

It means the government is gearing up for 2020 and assessing our national markets heading into the new decade…and you should too. Here is everything you need to know about our current market.

1. Yield is increasing

The 10-year Treasury yield measurement is used to determine many important financial matters, including mortgage rates. Today, the 10-year Treasury yield level is 1.84% with a lean toward higher yields up to 2.0%, meaning the U.S. is in a high-yield environment where investors are buying low and selling high.

Significantly, the market recently achieved a 100-day moving average (up from a 50-day moving average). This increase means investment security is increasing. The graph below shows the instances this has occurred in the past and points out the subsequent run-ups of the 10-year Treasury yield spread when this occurs.

FOMC Chart

2. Rates are increasing

Remember, higher yield also means higher rates. In late 2018, U.S. markets hit the high rate of 3.2% before dropping to the lower rates we saw this year. However, as yield continues to rise, the rates will rise also.

3. The economic climate is uncertain

The current U.S. rate environment has its own unique set of uncertainties. External factors such as the upcoming presidential election, the ongoing China trade deal and others no doubt play a significant role in the rate environment and the FOMC’s handling of the U.S. money supply.


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