U.S. Treasury long-term yields have moved lower in recent days following the March 20 update on monetary policy by the Federal Open Market Committee. In addition, global growth metrics are signaling weakness and markets are trading in risk-off mode. In its policy statement, the FOMC indicated its intention to keep interest rates unchanged for the rest of 2019 and to end balance sheet reductions by September. The potential for a rate hike in 2020 remains.

U.S. Treasury long-term yields have taken a downturn over the past few months as the equity markets remain volatile, while the Federal government partial shutdown continues. It appears there is limited urgency on the part of politicians to come to an agreement on a budget deal.

To engineer an economic “soft landing,” Federal Reserve monetary policy must be tightened at just the right time and just enough to avoid an overheating economy without triggering a recession. The Fed has accomplished this feat only one time since it was established in December 1913, nearly 105 years ago.

Major economic and financial market themes currently in play include a nice rebound in U.S. domestic growth, a moderate acceleration in inflation, and continued gradual improvements in the labor sector. Monetary policy appears to be on track for two more rate hikes this year while the potential for a trade war between the U.S. and its major trading partners is increasingly worrisome.

The Bureau of Economic Analysis is getting ready to release its final revision to the Q4 2017 Gross Domestic Product, which is expected to come in around 2.5 percent. This compares to real growth rates of 3.1 and 3.2 percent for the second and third quarters, respectively, and indicates economic activity is continuing to expand, albeit at a slower pace.

We’ve yet to get the official report on real GDP for the final quarter of 2017, but we’re expecting the Bureau of Economic Analysis to report the economy expanded by 2.5 percent. The economy is near full employment with the official unemployment rate at 4.1 percent, while non-farm payrolls expanded at an average of about 175,000 a month.

U.S. Treasury yields have been trending higher over the past couple weeks on better-than-expected growth in the manufacturing sector, increases in oil prices, more hawkish commentary from the Federal Reserve, increased optimism by equity markets over potential tax policy reforms, and an easing in sabre rattling by North Korea.

Last week we received the final report on Q1 real Gross Domestic Product, which indicated the economy expanded by 1.4 percent during the opening quarter of 2017. Year over year, the economy expanded at a modest 2.1 percent. Looking deeper into the report, consumer spending grew by 1.1 percent, which accounts for over two-thirds of the economy, compared to a 3.2 percent growth rate for 2015 and an average of 2.3 percent for the past five years.

For the most part, the major U.S. equity indexes have been on the up escalator since February of last year. Some analysts do not believe this type of performance can be sustained, especially on increased policy uncertainty from the Trump administration and elections in Europe.

U.S. Treasury yields are up about 30 to 40 basis points since the U.S. Presidential election on Nov. 8, 2016. The two-year yield, at 1.23 percent, is down from a seven-year high of 1.28 percent on Dec. 15, the day after the Federal Reserve increased monetary policy rates. The 10-year yield is at 2.45 percent, which is down from 2.60 percent on Dec. 15, the highest the 10-year yield has been since September 2014.