TD's assessment of the June FOMC: "YCC You......>

FED: TD's assessment of the June FOMC: "YCC You Later"

- The tone remained dovish, reinforced by the dot plot and press conference.

- Statement's "will closely monitor developments," was a change from "will

closely monitor market conditions" and is consistent with emphasis on QE being

used for monetary stimulus broadly rather than merely to support market

functioning, esp since statement noted "financial conditions have improved."

- We believe officials will want to see the trend in inflation solidly above 2%

again before they start the tightening process. We continue to expect the Fed to

use YCC at the 3y point before year-end to reinforce dovish forward guidance

that links tightening to minimum for inflation in the context of avg targeting.

- It is no surprise that the 7y sector outperformed on the curve as it benefited

from forward guidance and QE.

- We believe the Fed will eventually have to step up long-end purchases to

backstop long-end rates; QE to continue until end-2021 (though at a slower pace

in 2021). If the 10y crosses 1%, we think that the Fed might increase the

duration of purchases.