Bond Markets: Volatile and Weak

(click charts to enlarge)

A recent article pointed out that bond ETFs are trading at significant discounts to their net asset values in many cases, making them like closed-end funds. While increased volatility in the stock market has gotten most the press, the volatility in fixed income has been equally significant, as we can see among municipal bonds (MUB; top chart); investment grade corporate bonds (LQD; middle chart); and 10-year Treasury yields ($TNX; bottom chart).

Note how prices for muni and corporate bonds have moved sharply lower and how longer-term Treasury yields have recently moved significantly higher. No doubt investors have been liquidating positions to get into cash, but the rise in yields may also have something to do with inflationary expectations in the face of massive rescue plans and talk of large, costly economic stimulus packages.

Comments

[oldgoldbug:]

This kind of information is why you are in my watchlist. Thanks for keeping an eye on what really counts and bringing it to our attention.

2008 Oct 15 01:16 AM