2016 Q2 Fixed Income Commentary

The second quarter of 2016 has been one for the books. Negative interest rates continued to confuse investors, Puerto Rico defaulted on their constitutionally guaranteed GO debt, US politics continue to provide global amusement… however the UK eclipsed them all with a surprise vote to leave the European Union. The “Brexit” surprised markets and caused a rush of volatility near the end of the quarter. Fortunately, the swing was quick and the market bounced back before quarter end. The S&P ended the quarter up 2.5%. However, volatility has taken a toll on bond yields, and safe havens like US Treasuries yields have continued to fall; the 10 year Treasury yield ended the quarter at 1.49%. The May employment report was bleak and the Fed predictably punted on a rate increase. After the Brexit, the market is predicting only a 50% possibility of even one increase this year…