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Category Archives: Bond Market Perspectives

Many Happy Returns

The phrase “many happy returns” is often used for a birthday greeting and meant to augur a long, successful life. More broadly, the term can be used as a greeting to offer hope that a festive event would repeat many mort time in the future. The current bond market environment can hardly be described as festive, but the month of September has bond investors exclaiming…

Bond Market Perspectives

When Will the Selling Stop?

The past week brought about the summer solstice, the official start of summer, but for bond investors it feels more like the dead of winter. Bond weakness continued in response to a Federal Reserve (Fed) that remains fixated on slowing, or tapering, bond purchases following last week’s policy meeting…

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When Will the Selling Stop?

The Yield Rally Continues

In a previous life as a bond trader, my colleagues and I would try to find solace amid bond market sell-offs by focusing on the rise in yields as a potential opportunity going forward. The “yield rally” as we described it, was a half-hearted attempt to find something positive and provide a lift during discouraging bond market declines. But recent bond market weakness is no laughing matter, and as we discussed last week, May 2013 was one of the worst monthly performances for high-quality bonds over the past 10 years…

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The Yield Rally Continues

Miserable May

All eyes are on this week’s release of the monthly employment report (on Friday, June 7, 2013), as high-quality bonds concluded one of their worst monthly performances of the past 10 years. The broad Barclays Aggregate Bond Index declined 1.8% in May 2013, the worst monthly performance since December 2009, which in turn is the weakest since October 2008…

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Miserable May

Assessing Interest Rate Risk

It seems there is no shortage of investors willing to forecast the impending doom for the bond market stemming from a reversal of the long decline in interest rates. Last week, the commissioner of the Securities and Exchange Commission (SEC) Daniel Gallagher stated that “financial armageddon” awaits municipal bond investors due to rising interest rates. Commissioner Gallagher tried to retract comments late in the week, saying he was merely trying to make bond investors aware of potential risks, but nonetheless joined a long list of doomsdayers who have used…

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Assessing Interest Rate Risk

Recurring Themes

Lower-rated bonds led performance within the bond market during the first quarter of 2013, continuing a theme from 2012. The combination of higher yields and good fundamentals led to price gains among lower-rated bond sectors such as high-yield bonds, preferred stocks, and bank loans. Gains among lower-rated bonds contrasted with price declines and modest losses on high-quality bonds…

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Recurring Themes

Back to the Highs

Bond yields are back to the highs of the year after gains from the prior week were more than erased. A stronger-than-expected employment report, continued stock market strength, and reduced fiscal uncertainty pushed the 10-year Treasury yield back to 2.06%. The municipal bond market, struggling with its own unique circumstances…

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Back to the Highs

Waiting for the Spring

Municipal bonds have struggled in February following a good start to 2013. Price declines have translated to modest losses for investors in February, but on a positive note, year-to-date municipals still hold a performance advantage to their taxable counterparts (both through February 22, 2013), according to Barclays Index data. The tough slog for municipal bonds may continue in March, leaving investors to…

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Waiting for the Spring

Purchases Persist

This week’s meeting of the Federal Reserve (Fed) policymakers has seemingly received little fanfare as negotiations over the “fiscal cliff” continue in Washington and dominate the headlines. Yet the Fed meeting will be noteworthy, as the Fed is widely expected to announce additional outright bond purchases. Operation Twist, the Fed’s maturity extension program…

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Purchases Persist

Fixed Income 2013 Outlook

As 2012 winds down, bond investors are reflecting on a good year but questioning what 2013 has in store. Bond investors have enjoyed a good year in 2012, with the bond market on pace to finish the year at the high-end of our low- to mid-single-digit total return forecast. Due to slow economic growth, European debt concerns, and perhaps most importantly, a very market-friendly Federal Reserve (Fed), bond prices continued to rise, and yields continued on their downward descent in 2012. Of course, most bond investors…

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Fixed Income 2013 Outlook