Thought Leadership

Market Review and Outlook 4th Quarter 2004

January 5, 2005

The sense of calm and tranquility pervading the securities markets during the fourth quarter was at odds with the significant shifts that occurred beneath the surface.  While the U.S. economy continues to grow at a healthy, moderate pace, and CPI has accelerated from a 2.5% annual rate to a 3.5% annual rate, the bond market has remained serene and undisturbed.  Longer term interest rates remain near twenty-year record low levels, despite the fact that the Federal Reserve added two more 25 basis point tightening moves to its measured pace.  Though the yield on the one-year Treasury rose from 2.18% to 2.79% during the quarter, the yield on the ten-year Treasury note increased just 9 basis points to close at 4.25%.