It's about the end of US interest rate increases, as well as the start

It's about the end of US interest rate increases, as well as the start. While it seems everyone is concerned with Fed timing of the first rate hike, we are as concerned with when, and at what level, its last rate hike comes. The terminal rate has undergone a much more radical change in expectations, which is interesting because it has been a better indicator of the direction of 10-year US Treasury bonds, and indeed the global bond market, since the idea that quantitative easing may be tapered arose in June 2013. To help us with determining market expectations surrounding the terminal rate, we need to pick a far enough out contract to give the Fed ample time to finish its hiking cycle, while still being liquid. For this purpose we have chosen the December 2019 Eurodollar contract, which also describes three month rates (starting every three months into the future) for the next five years. What does this mean for investments in equities and bonds? Click here for more from Portfolio Manager Peter Farac (VIEW LINK)