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02-11-19 Market Commentary

The bond market starts another week with low volatility and stocks poised to open in the green. Aside from one blip on January 3rd, the 10yr UST has been between 2.65% and 2.75% since the beginning of the year. Economic data remains pretty good yet the market seemingly looks past that and have tended to focus on US-China trade talks and the on-again off-again Brexit talks. The markets have also been calmed down as the Fed has indicated that they will likely pause with their program of rate hikes.

The yield curve remains flat with the 10yr/2yr spread at 17 basis points. That doesn’t mean however, that there are no opportunities to take advantage of. With overall municipal supply low the demand for that asset class remain high hence strengthening the bid for short term bonds in particular. Many portfolio managers have determined that moving from short municipals into 15yr MBS for example, enhances overall yield and cashflow to fund loan growth.