Weekly Economic Update: December 23rd, 2019
• Treasury yields rose slightly on reduced trading volume as the New Year approaches. Last week the two-year Treasury note rose to a yield of 1.64% from 1.61% while the five-year Treasury rose to 1.73% from 1.66%. The yield pickup to move from 2-year notes to 5-year notes is now at a one year high of nine basis points.
• At their last policy meeting of the decade, Fed officials put the rate-cutting cycle on pause after three quarter-point reductions in 2019. Along with receding recession threats, the Fed cited that the economy is in a “good place” and a pause in rates should allow the yield curve to steepen back into a more normal shaped curve. This movement should cause longer securities to rise in yield relative to shorter securities.
• The consumer is in good shape with income gains outpacing spending, households have been able to build up a cushion of savings. The personal savings rate edged up from 7.8% to 7.9%, well above the 6.1% average over the past 25 years.