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Please be advised that future verbal and written communications from the bank may be in English only. These communications may include, but are not limited to, account agreements, statements and disclosures, changes in terms or fees; or any servicing of your account.

Por favor, tenga en cuenta que es posible que las comunicaciones futuras del banco, ya sean verbales o escritas, sean únicamente en inglés. Estas comunicaciones podrían incluir, entre otras, contratos de cuentas, estados de cuenta y divulgaciones, así como cambios en términos o cargos o cualquier tipo de servicio para su cuenta.

Informamos que as futuras comunicações do banco, verbais e escritas, podem estar disponíveis apenas em inglês. Essas comunicações podem incluir, entre outras, acordos de conta, extratos de conta e divulgações, alterações aos termos ou tarifas, ou qualquer tipo de serviço pertinente à sua conta.

仅此通知,本行即日起发出的口头及书面通信可能将只提供英文版本。这些通信可能包括但不限于账户协议,账单和通知,条款或费用变更;或任何为您账户提供的服务。

Please be advised that future verbal and written communications from the bank may be in English only. These communications may include, but are not limited to, account agreements, statements and disclosures, changes in terms or fees; or any servicing of your account.

Por favor, tenga en cuenta que es posible que las comunicaciones futuras del banco, ya sean verbales o escritas, sean únicamente en inglés. Estas comunicaciones podrían incluir, entre otras, contratos de cuentas, estados de cuenta y divulgaciones, así como cambios en términos o cargos o cualquier tipo de servicio para su cuenta.

Informamos que as futuras comunicações do banco, verbais e escritas, podem estar disponíveis apenas em inglês. Essas comunicações podem incluir, entre outras, acordos de conta, extratos de conta e divulgações, alterações aos termos ou tarifas, ou qualquer tipo de serviço pertinente à sua conta.

仅此通知,本行即日起发出的口头及书面通信可能将只提供英文版本。这些通信可能包括但不限于账户协议,账单和通知,条款或费用变更;或任何为您账户提供的服务。

The-Fed-is-in-control

Perspectives

The Fed is in control

Kris Xippolitos

By Kris Xippolitos

Head - Fixed Income Strategy

September 9, 2020Posted InFixed Income and Investment Strategy

• At the Jackson Hole Economic Symposium on August 27, US Federal Reserve Chairman Jerome Powell announced changes to the central bank’s monetary policy framework. During his speech, Powell focused specifically on the persistent undershoot of inflation from their 2.0% longer-run objective. The Fed will adopt flexible average inflation targeting that will average 2.0% over time. This implies a willingness for the Fed to allow inflation to run above 2.0%, without the need to tighten policy. Powell also expressed some modification to the Fed employment mandate, implying labor markets can improve, inflation can rise, and policy rates can remain low.


• With forward inflation expectations still below 2.0%, policy rates are likely to be on hold for some time. Eurodollar futures are not pricing in rate hikes until 2024, while Fed futures are also implying lower for longer. In our view, we would not expect the Fed to consider raising policy rates until the recovery is sustained, labor markets improve and inflation stabilizes at or above 2.0%. 


• For now, long-term US rates will likely be contained by a slow economic recovery, large-scale asset purchases by central banks, possible re-emerging concerns over rising COVID infections and the delay of additional fiscal stimulus. However, a credible COVID vaccine could push 10-year yields back over 1.0%. We favor positioning for a steeper US Treasury curve, while taking advantage of low policy rates by using leverage to enhance portfolio yields.


• With real rates negative, we prefer credit risk to interest rate risk. Spreads in corporate credit have narrowed meaningfully, supported by central bank asset purchases. The coming months do present some risks to markets (i.e., US election, COVID reacceleration), however, the Fed’s unprecedented credit facilities are expected to limit significant spread widening. We continue to favor high yield bonds (particularly Fallen Angels), preferred stocks, structure credit and emerging market debt

Read Bond Market Monthly