Thursday April 28, 2011 - 20:28 PM EDT
Business Wire News Releases
Stone & Youngberg, a leading financial services firm and the nation's top underwriter of California and Arizona municipal bonds over the past five years1, is pleased to share the following comments in regards to the Federal Open Market Committee meeting on Wednesday April 27th.
In this note, Paul Touchstone, CFA, Stone & Youngberg's Senior Investment Strategist and Portfolio Manager noted:
On Wednesday April 27th the Federal Open Market Committee (FOMC), which sets short-term interest rates and monetary policy for the U.S., held its regularly scheduled meeting and provided little in the way of new information that alters our current investment strategy.
As we commented in our letter to investors on Tuesday April 26th:
"Demand is picking up, yet unemployment remains stubbornly high. As such, an abrupt exit from their [Federal Reserve] policies seems unlikely at this time. We expect the Fed to remain accommodative by pinning down short-term interest rates near zero for the remainder of the year even as pricing pressures are beginning to quicken."
Ben Bernanke, chairman of the Federal Reserve, acknowledged for the first time that commodity prices were beginning to impact inflation in the short-term, though he continues to anticipate inflationary trends to remain stable over the long-term. This suggests a continuation of their accommodative policies.
While their quantitative easing program part II (QE2) will end in June, as expected by investors, Bernanke stated that their $3 trillion balance sheet would remain constant.
Our calculations show that the Federal Reserve will need to reinvest approximately $200-$300 billion over the next 12-months in order to keep their balance sheet constant. These numbers are not trivial and will continue to provide the capital markets with additional liquidity.
The question that investors and advisors need to be asking is what the impact will be on longer-term US Treasuries yields and US Government bond yields when the Federal Reserve begins exiting their accommodative stance by selling their balance sheet to the market. We would not want to be on the other side of this trade.
Summary
- No changes to our investment strategy at this time
- Fed to remain accommodative with both short-term interest rates & a continuation of bond purchases to maintain their balance sheet
- No change to Fed Funds rates
- Long-term inflation to remain stable
Stone & Youngberg has 80 years of experience as a market leader in providing securities expertise to individual and institutional investors. We are uniquely positioned to offer investors both fixed-income brokerage and fee-based asset management services.
The firm's asset management approach relies on reducing volatility and minimizing exposure to risk. This is designed to increase the probability of meeting our investors' financial objectives under diverse economic conditions. Investors can choose between two distinct and diversified investment programs: active investment management and passive investment management. Strategic thinking combined with a high level of personal attention results in an investment portfolio tailored to our investors' unique requirements.
About Stone & Youngberg: Stone & Youngberg Holdings LLC is a financial services company providing a range of products and services. Stone & Youngberg LLC, founded in 1931 and member FINRA/SIPC, specializes in the origination and sale of fixed-income securities. The firm led or co-managed the sale of 927 municipal bond issues totaling $21 billion over the past five years. In addition to bond underwriting and sales, Stone & Youngberg provides investment services to individuals, institutions, and government agencies and offers a wide variety of tax-exempt and taxable securities.
Additional information is available at www.syllc.com or by calling 800-447-8663.