Last week policy makers in both the fiscal and monetary realms helped solidify investor confidence going into 2014. Republicans and Democrats agreed on the first bipartisan federal budget in four years and, after passing in the House two weeks ago, the bill was passed by the Senate 64-36. President Obama has said he will sign the bill into law. On the monetary policy front, the Federal Open Market Committee, the interest-rate-setting authority within the Federal Reserve, elected to “taper” its monetary accommodation by reducing monthly bond buying to $75 billion from $85 billion. In spite of reduced Fed purchases, the first such action since large-scale asset purchases were initiated in November 2008, equity markets hit new highs on improved economic forecasts and budget clarity from Washington. These are positive developments for fixed income investors with dry powder in their portfolios looking for reduced volatility and yields more consistent with historic averages. We expect interest rates to continue their upward trajectory over the next year, which allows SNW Asset Management clients to reinvest principal and interest payments at steadily increasing yields while maintaining the same limited interest rate risk exposure.