The U.S. economy continues to expand at a healthy pace. Excluding 1Q14, which was artificially low because of the harsh winter, GDP growth exceeded 3.5% every quarter since 3Q13. Such strong growth rates have been scare during the last 15 years. Looking forward, Bloomberg consensus median forecasts are for 3% each quarter in 2015.
In October, the FED ended its quantitative easing program and the focus returns to its main instrument of monetary policy: The Federal Funds Rate. After an unprecedented period of low interest rates, we believe rates will be raised sooner rather than later in 2015. Because of the high correlation, treasury yields will rise when rates are increased.