View from the Observation Deck  

1. The yield on the 10-year Treasury note (T-note) closed at an all-time low of 0.51% on 8/4/20, according to Bloomberg.  
2. From 8/4/20 through 8/9/22, its yield rose from 0.51% to 2.78%, or an increase of 227 basis points, based on the close of trading. It reached as high as 3.48% on 6/14/22 during the period.    
3. As indicated in the chart above, the only two debt categories in positive territory for the period were leveraged loans (senior loans) and high yield corporate bonds, both of which are speculative-grade securities.  
4. Emerging market bonds and intermediate-term global government bonds were deep into negative territory for the period captured in the chart. The strength in the U.S. dollar definitely had a negative impact on the performance of foreign bonds, in our opinion. The U.S. Dollar Index (DXY) rose by 13.91% over the same period, according to Bloomberg.   
5. Inflation remains elevated. The trailing 12-month CPI (Consumer Price Index) stood at 8.5% in July 2022, up from 1.3% from August 2020. The CPI is at a level not seen since 1982, according to data from the Bureau of Labor Statistics.
6. As of 8/9/22, the federal funds target rate (upper bound) stood at 2.50%, up from 0.25% this past March. The Fed has signaled that it is prepared to take rates higher if the data warrants it. The Fed’s next meeting is scheduled for September 20-21. 
7. For comparative purposes, the federal funds target rate (upper bound) averaged 2.46% for the 30-year period ended 8/9/22. Stay Tuned! 

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 BofA 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 S&P/LSTA U.S. Leveraged Loan Index is a market value-weighted index designed to measure the performance of the U.S. leveraged loan market. The ICE BofA Emerging Markets Corporate Plus Index tracks the performance of U.S. dollar and euro denominated emerging markets non-sovereign debt publicly issued in the major domestic and eurobond markets. The ICE BofA 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 ICE BofA 1-3 Year U.S. Corporate Index is a subset of the ICE BofA U.S. Corporate Index including all securities with a remaining term to maturity of less than 3 years. The ICE BofA 1-3 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 of less than 3 years. The ICE BofA 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 BofA 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 BofA 7-10 Year Global Government (ex U.S.) Index tracks the performance of publicly issued investment grade sovereign debt denominated in the issuer's own domestic currency with a remaining term to maturity between 7 to 10 years, excluding those denominated in U.S. dollars. The ICE BofA 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 BofA Freddie Mac Mortgage Backed Securities Index is a subset of the ICE BofA U.S. Mortgage Backed Securities Index including all generics representing pools issued by Freddie Mac.

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