Market Review and Outlook 1st Quarter 2007
The stalemate in the fixed income markets continued during the first quarter, with a resolute Federal Reserve holding short rates at 5.25%, while foreign buyers and investors expecting lower inflation and softer economic growth held bond yields much lower. Corporate and municipal borrowers rushed to the market in record volume, while investors bought with abandon. Treasury and municipal yields are close to year-end levels. Furthermore, 5, 7, 10, and 30-year municipal yields are almost exactly unchanged from year-end, although they remain well below the levels of last June when the Federal Reserve last raised the Fed Funds rate.