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Category Archives: Bond Market Perspectives

Comfortably Numb

After climbing the wall to five-month highs in March 2012, Treasury yields are back down to their lowest levels since late February. The three-week spring break excitement in the bond market that witnessed the 10-year Treasury spike briefly to 2.4% is likely over, and Treasury yields have moved steadily lower since early April.…

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Comfortably Numb

Deliberating Defaults

Bond investors, both taxable and municipal, pay close attention to bond defaults, which in turn can affect the prices of high-yield bonds. With a bond’s maturity price capped at par (100), defaults open up bond investors to receive significantly less than par value and can more than wipe out the value of interest income received over the life of a bond.

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Deliberating Defaults

Municipal Breather

Municipal bonds took a breather last week, underperforming Treasuries for only the second week thus far in 2012. Municipal bond prices posted modest declines while Treasury prices rebounded on the week. On a year-to-date basis, however, high-quality municipal bonds have outperformed Treasuries by a notable margin, according to Barclays Index data. We do not think last week’s pause in the municipal bond market marks a turning point …

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Municipal Breather

Beauty Is in the Eye of the Bondholder

High-yield bonds delivered investors a bouquet of roses so far in 2012. But an increase in the default rate has investors questioning high-yield sincerity. Last week, Moody’s Investor Service (Moody’s) reported the global speculative default rate increased to 2.0% in January 2012 from 1.8% in December 2011. Seven companies…

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Beauty Is in the Eye of the Bondholder

The Ides of January

In ancient Rome, the “Ides” marked the middle days of every month of the Roman calendar. The Ides of March are most well-known, as it marks the assassination of Julius Caesar by a group of conspirators led by Brutus. The phrase became immortalized in Shakespeare’s play, Julius Caesar. Last week marked the middle of January and while far less dramatic than the fall of a Roman emperor, the last several days have proved a difficult time for the Treasury market…

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The Ides of January

High-Yield Halloween Hangover

After a very strong October, high-yield bonds have pulled back in November in a Halloween Hangover. October 2011 was tied for the fifth best month of performance for high-yield bonds relative to Treasuries on record (according to Barclays index excess return data). But, mid-way through November high-yield bonds have lagged Treasuries by 1.4% month-to-date. The pullback over the past two weeks…

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High-Yield Halloween Hangover

Mix It Up With MBS

High-quality agency mortgage-backed securities (MBS) may help investors reach a middle ground between the volatility of corporate bonds and expensive, low-yielding Treasuries. During periods of safe-haven buying, MBS typically lag Treasury gains but still benefit. Conversely, when risk appetites increase, MBS typically lag, or diverge, from corporate bond gains but do not exhibit the same weakness as Treasuries…

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Mix It Up With MBS