Macro-Market Drivers & The Fed Policy
The Fed’s words are more than market-moving reports. Central bank communications are embedded with a wide variety of macroeconomic information, including expert projections of coming economic trends. When evaluated by our process, these dispatches serve as an excellent leading indicator of fixed-income fluctuations.
The Fed Index and the 10-year bond yield are strongly correlated, and, in the majority of instances, the rises and falls in the Fed Index pre-date movements in the bond market. For fixed-income players the Fed Index is the trend data they’ve been waiting for, as the Federal Funds Rate (FFR)–pinned to zero since 2009–can no longer be used to help decode the market.
With familiar indicators out of commission and the rise of central bank communication, the Fed Index presents itself as timely solution for fixed-income investors. This compact, versatile signal takes the mystery out of market movements, affording investors confidence in a turbulent financial landscape.