The Fed is likely to wrap up hiking rates by year-end, which is good news for fixed income investors. What the Fed has articulated and what futures markets indicate is that they will finish with the federal funds rate in the 3.0% to 3.50% range.
This also jives with current yield levels. Outside the short-lived spike in early June, longer rates have been ranging around 2.75% to 3.0% since April. This is where markets see fair value and implies a hike of 50 basis points in September, with the possibility of two 25-basis-point hikes in the last two meeting of 2022.
This suggests the rate damage from here will be contained and supports our base case of positive returns in the second half.
This post appeared first on ETF Trends.