As the US Federal Reserve holds interest rates again, Jeff Keen, Head of Fixed Income at Waverton, gives his views:

For a while we have said that the timing of the first rate hike in the US was much less important than the overall path of rates over the next couple of years.  In its statement last Wednesday, the Fed continued to use the phrase ‘considerable time’. This referred to the time remaining to the first rate hike, but the projections for future rates also rose slightly.  It was the latter which dictated the direction of markets as it digested the contents of the statement, with yields moving higher and the US Dollar moving significantly higher as well.

Markets should stop focussing on ‘when’ and think about ‘how much’.

With recent data remaining strong and increasing signs of a return to normal growth rates, we continue to expect higher yields going forward. In general we observe that investors are complacent about the negative duration effects across the main bond sub asset classes.

As at 23.09.14