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Lowering Interest Rate Target - No Change in Strategy

August 14, 2012

Given investor anxiety, the appetite for fixed income securities continues unabated even as interest rates remain near historically lows.

-Brian Rehling, chief fixed income strategist, Wells Fargo

European worry and uncertainty over the upcoming U.S. fiscal cliff looks likely to dominate investors concerns for the rest of 2012. Given investor anxiety, the appetite for fixed income securities continues unabated even as interest rates remain near historically lows. Absent a significant improvement in the U.S. economy, a resolution of European debt concerns or a solution for the domestic fiscal situation, we expect demand for fixed income securities to remain strong throughout the rest of 2012, as investors look to securities that are perceived to have lower risk. Given that demand appears likely to remain elevated in the near term, we are decreasing our year-end 2012 yield target for the 10-year Treasury to 2.00% from 2.50%.  At the same time, we are reducing our 2012 target for the 30-year Treasury yield to 3.00% from 3.50%.

 

 

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