Since March 2020, the federal government has enacted four pieces of legislation to assist businesses and individuals weather the economic downtown triggered by the COVID-19 outbreak. According to the Congressional Budget Office (CBO), these four pandemic-related laws are projected to increase the federal deficit by USD 2.2 trillion in fiscal year 2020 and by USD…
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As global financial markets grapple with assessing the economic impact of COVID-19, U.S. Treasury yields reached unprecedented levels. On March 9, 2020, the yield on the 10-year U.S. Treasury Bond fell to an intra-day low of 0.32%. This was a drop of more than 125 bps from just three weeks earlier. As market participants fled…
The story line for a number of years now has been the “search for yield” and how the recent low-interest-rate environment has been forcing investors down in credit or out the maturity curve in an effort to maintain income though adding risk. Now that interest rates have begun reversing the low-rate environment, fixed-coupon securities may…
The ten year Treasury note closed with a yield over 2.5% this week, sparking talk that interest rates may have bottomed. The first chart shows the yield on the 10 year treasury going all the way back to 1953. As seen there, the bottom in July 2016 at 1.5%. Last March the yield was 2.5%,…
The U.S. Treasury yield curve, as represented by the S&P U.S. Treasury Bond Current Indices, ended June 14, 2017, tighter (lower in yield) than the previous day. The importance of June 14 is that it was the day on which the U.S. Federal Reserve raised the target rate by 25 bps, from 1% to 1.25%. The following…
With the President’s focus on the U.S. infrastructure this coming week it is a good time to look at the existing infrastructure bond markets. Municipal bonds have long played a critical funding role in the U.S. infrastructure sector. The 19,000 tax-exempt municipal bonds tracked in the S&P Municipal Bond Infrastructure Index mainly consist of investment grade bonds…
There have been a myriad of articles with headlines and content about rising rates, the coming evisceration and other zombie apocalypse events in the bond markets. There can be no doubt that yields for fixed income asset classes are low and there is also no doubt that rates will eventually be higher. How, when and…
Overall, general obligation bonds have underperformed revenue bonds over the last five years of low rates. State general obligation bonds have been the sector that is holding back returns as the lower yield and shorter duration characteristics of these bonds have resulted in muted returns in the up market. While revenue bonds have a larger foot print by par…
This morning’s Wall Street Journal reported, rather breathlessly, that “U.S. bond yields are topping a key measure of the dividends that large U.S. companies pay—a shift that has broad implications for investors….” The headline was triggered by the observation that the 2.50% “yield on the 10-year U.S. Treasury note…exceeded the 1.91% dividend yield on the…
Why worry? New highs for the U.S. stock market indices will keep coming, right? Just in case, this might be a good time to examine asset classes that are not correlated to the equity market or the “uncorrelated”. Corporate bonds of the issuers in the S&P 500 are tracked in the S&P 500 Bond Index. As a group…
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