This changes my personal view to less bullish on equities in 2016 as the hopes for some interest rate increases in 2016 wanes.
And further, whatever positive pitifully low US rates we had, they are now in full retreat since the Brexit as the US 10-yr has broken thru 1.5% and finished yesterday at 1.37%.
I'm sure the Fed is getting nervous as their portfolio yield is being reduced and converges upon their IOR liability; even their MBS is probably looking at increasing pre-payments as US mortgage rates approach all-time lows this week of 3.48% on a 30-yr fixed.
If this trend in rates continues they will be forced to have to lower their policy rate perhaps even to negative rates. They may have missed their one opportunity to start to raise at this point.
New York Fed President William Dudley, meeting with business and community leaders in Binghamton, New York, said that the U.S. economy is doing "ok" on average but that it was too soon to tell the effects of last month's so-called Brexit referendum.
A close ally of Fed Chair Janet Yellen, Dudley did not say when he expected the central bank to raise rates after having initially tightened monetary policy in December. But he cautioned there were reasons to wait and see.
"With uncertainties about the outlook and inflation being lower than desired, it allows us to be a little more patient," Dudley, a permanent voter on Fed policy, said in the heart of this former manufacturing city.
"If you strip out the energy sector, inflation is still a little below what we would like... so that allows us to be patient in terms of letting the economy run with accommodative monetary policy in place," he said.
MCTN Fed patient on US rates due to Brexit, inflation: Dudley: The Federal Reserve can be patient on raising... https://t.co/KlO24DbdG0— NewsOnFire (@AshikOnFire) July 6, 2016