Daily Market Color June 28, 2016Risk Assets Rebound on Central Bank Speculation and Bargain Hunting Risk assets are rallying while Treasurys are selling off across the curve for the first time since last week’s UK referendum. Bargain-hunting is behind some of the market move, but the main driver is speculation that global central banks will take coordinated action to limit the impact from the Brexit decision. There is a rumor that the Bank of Japan’s Kuroda and Japanese PM Abe will meet tomorrow to discuss the recent market moves, and trading in Fed funds futures currently indicates there is now a higher probability of the Federal Reserve cutting rates (15%) rather than raising them (10%) this year (even though there has been no indication from the Fed that a cut is even being considered at this time). The first full hike is now priced into December of 2018, 1.5 years later than markets were indicating the day before the Brexit vote. Looking past the ongoing Brexit fallout, economic data released today painted an upbeat view of the US economy. The latest update from the Commerce Department showed US GDP expanded more than previously projected in the first quarter. GDP was revised to an annualized pace of 1.1%, up from the 0.8% previously reported, as gains in trade and business investment offset underperformance from household consumption. Looking ahead, most economists believe the US economy bounced back in the second quarter, buoyed by a rebound in consumer spending. A separate report showed consumer confidence increased in June for the first time in three months, however the cutoff date was a week before the UK referendum. All three major US stock indexes are currently trading up between 1.00% and 1.50%, while Treasury yields and swap rates are 2-3 bps higher across all major maturities. Oil prices also rebounded, with both WTI and Brent crude currently trading up over 2%.