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Kathy Jones

Jan 25 • 4 tweets • 2 min read

A thread about #CorporateBonds prepared by my colleague Collin Martin.

Investment grade corporate bonds have been hit by the double whammy of rising #Treasury yields and rising spreads this year.

High-yield bonds have performed slightly better despite a larger move in spreads since they have a lower average duration.

Neither market is cracking yet. HY spreads are still in the 2021 trading range.

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Kathy Jones

@KathyJones

Jan 27

This just in from my colleague Cooper Howard: It’s shaping up to be a wild day in #muniland. Munis are finally waking up to the prospect of tighter monetary policy. Since the start of the year, yields are up relative to Treasuries.

The biggest move has been in short-term munis where spreads were very low.

The move higher in yields has resulted in negative returns for muni mutual funds and ETFs. Recently, the streak of consecutive weeks of inflows reversed.

Read 4 tweets

Kathy Jones

@KathyJones

Jan 5

Ahead of the release of the FOMC minutes, the discussion has moved from the timing and magnitude of rate hikes to reducing the balance sheet.

Even doves are on board with moving faster than in the post financial crisis era because inflation and growth are much stronger. Comments from Fed officials imply many options are on the table.

From Oct 2017 to July 2019 the Fed shrunk the balance sheet from 22.9% of GDP to 17.8% by allowing bonds to mature without reinvestment but using “caps” to smooth the process.

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