A Snapshot Of Bond Valuations
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View from the Observation Deck  
  1. Today's blog post is one we do ongoing so that investors can monitor fluctuations in bond prices relative to changes in interest rates.
  2. The yield on the benchmark 10-year Treasury note (T-note) fell from 3.20% at the close of 11/5/18 to 1.86% on 11/5/19, or a decline of 134 basis points (bps), according to Bloomberg. The closing low for the period was 1.46% (9/3/19), while the closing high was 3.24% (11/8/18). The all-time closing low for the yield on the 10-year T-note was 1.36% on 7/8/16, according to Bloomberg. 
  3. Since 11/5/18, the Federal Reserve ("Fed") has decreased the federal funds target rate (upper bound) 50 bps, from 2.25% to 1.75%.  
  4. For the 30-year period ended 11/5/19, the federal funds target rate (upper bound) averaged 2.98%, according to Bloomberg. On a historical basis, the Fed's current monetary policy is not tight. 
  5. The only bond index featured in the chart that does not reflect an upward adjustment in pricing year-over-year is the S&P/LSTA U.S. Leveraged Loan 100 Index. Leveraged loan payouts are typically indexed to short-term rates, which we noted have declined year-over-year.   
  6. Investors funneled an estimated net $222.21 billion and $68.18 billion, respectively, into Taxable Bond and Municipal Bond mutual funds and exchange-traded funds for the 12-month period ended 9/30/19, according to Morningstar. 
This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions or other expenses incurred when investing. Investors cannot invest directly in an index. The ICE BofAML 22+ Year U.S. Municipal Securities Index tracks the performance of U.S. dollar denominated investment grade tax-exempt debt publicly issued by U.S. states and territories, and their political subdivisions with a remaining term to maturity greater than or equal to 22 years. The ICE BofAML Fixed Rate Preferred Securities Index tracks the performance of investment grade fixed rate U.S. dollar denominated preferred securities issued in the U.S. domestic market. The S&P/LSTA U.S. Leveraged Loan 100 Index is a market value-weighted index designed to measure the performance of the largest segment of the U.S. syndicated leveraged loan market. The ICE BofAML 7-10 Year U.S. Treasury Index tracks the performance of U.S. dollar denominated sovereign debt publicly issued by the U.S. government with a remaining term to maturity between 7 to 10 years. The ICE BofAML U.S. High Yield Constrained Index tracks the performance of U.S. dollar denominated below investment grade corporate debt publicly issued in the U.S. domestic market. The ICE BofAML U.S. Corporate Index tracks the performance of U.S. dollar denominated investment grade corporate debt publicly issued in the U.S. domestic market. The ICE BofAML Global Corporate Index tracks the performance of investment grade corporate debt publicly issued in the major domestic and Eurobond markets.


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Posted on Thursday, November 7, 2019 @ 12:34 PM

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.