World Looking Good…At The Moment
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Judging by the FOMC statement, the Fed looks set to keep the funds rate at 5.25% at least until 2007, and potentially for several months. Recent price action of the US 10-year Treasury yield and the December eurodollar future caused us to think that the statement may be somewhat hawkish in nature. However, despite Richmond President Jeffrey Lacker voting against holding rates steady, for the third straight month, Chairman Ben Bernanke is sticking to his guns of moderate economic growth and cooling inflation. As a result, the 10-year yield eased from around 4.84% to trade around 4.77% today. This has given a further boost to global equity markets, G7 and emerging alike, with the Hang Seng for example jumping to 18,378, just shy of its all-time high.