Best of the Bond Market for April 3, 2012
Tweet and Article by @thebasispoint
Rates Spike after Fed Minutes Our Take: The bond market has been positioning for more quantitative easing from the fed for some time now. The FOMC minutes seemed to indicate that they may not place their foot on the monetary easing gas pedel as aggressively as the market was anticipating and treasuries and other debt sold off sharply as a result. Check out the chart on Julian’s blog, this quote pretty much sums it up:
“We’re now down 73 basis points on the 3.5% Fannie coupon that serves as a benchmark for rate pricing. Today’s chart from MortgageNewsDaily (used with permission) says it all. This MBS drop off a cliff translates into rates .375% or higher if it holds. Rate spike to say the least. More to come, but it’s evolved from a quiet to a a truly ugly trading day.”
Here is what the move looked like on the intra day TLT chart, which is the ETF designed to track 20 year treasury bonds.
TLT Intraday Chart
In the grand scheme of things while this is a very large intra day move, as the daily chart of the TLT shows below, its basically blip on the long term chart:
TLT Daily Chart
Tweet and Article by @blackrock
High yield has experienced only 4 down years since 1980 - Our Take: Good stat from Blackrock however it has us wondering how much of this is because of the huge rally the bond market has been in as a whole since 1980, as bonds outperformed stocks over the last 30 years for the first time since the 1800s. I have also included a chart we put together on 6 month CD rates for some perspective on where rates have been since 1980.
6 Month CD Rates
Tweet from @Fixedology
“Another quarter of positive muni returns. Common themes: Overall market +1.75% in Q1, long bonds, lower rated bonds were top performers” Our Take: Good stat we wonder if part of the reason long bonds performed well because there was less supply in the market in Q1? Also imagine that lower rated bonds did well as risk appetite increased partially as a result of positive stock market returns and the more optimistic news headlines that always result when stocks rise.