In our previous letter in January we noted that the trend to lower inflation and interest rates will be bumpy as it usually is. The consensus then pointed toward lower yields ahead driven by perceptions of a slowing economy both here in the U.S. and abroad.
KEY OBSERVATIONS
For the month of March 2024, the yield on the 10-year US Treasury Note ended at 4.20%, 5 basis points lower from the previous month. The Bloomberg US Corporate Index tightened by 6 basis points to 0.90% over Treasuries. The A Rated Corporate Credit Spread decreased by 5 basis points to 0.77%. The BBB Rated Corporate Credit Spread decreased by 8 basis points to 1.10%.
KEY OBSERVATIONS
For the month of February 2024, the yield on the 10-year US Treasury Note ended at 4.25%, 34 basis points higher from the previous month. The Bloomberg US Corporate Index remained the same at 0.96% over Treasuries. The A Rated Corporate Credit Spread remained the same at 0.82%. The BBB Rated Corporate Credit Spread remained the same at 1.18%.
KEY OBSERVATIONS
For the month of January 2024, the yield on the 10-year US Treasury Note ended at 3.91%, 3 basis points higher from the previous month. The Bloomberg US Corporate Index tightened by 3 basis points to 0.96% over Treasuries. The A Rated Corporate Credit Spread decreased by 3 basis points to 0.82%. The BBB Rated Corporate Credit Spread decreased by 3 basis points to 1.18%.
Since the bond market low in mid-October 2023, a strong rally ensued. The 10-year Treasury yield fell from 4.99% to 3.79% on December 27, 2023 (source: Bloomberg 1/17/24). Investor’s expectations of future interest rates drive the market.
KEY OBSERVATIONS
For the month of December 2023, the yield on the 10-year US Treasury Note ended at 3.88%, 45 basis points lower from the previous month. The Bloomberg US Corporate Index tightened by 5 basis points to 0.99% over Treasuries. The A Rated Corporate Credit Spread decreased by 3 basis points to 0.85%. The BBB Rated Corporate Credit Spread decreased by 9 basis points to 1.21%.
KEY OBSERVATIONS
For the month of November 2023, the yield on the 10-year US Treasury Note ended at 4.33%, 60 basis points lower from the previous month. The Bloomberg US Corporate Index tightened by 25 basis points to 1.04% over Treasuries. The A Rated Corporate Credit Spread decreased by 25 basis points to 0.88%. The BBB Rated Corporate Credit Spread decreased by 26 basis points to 1.30%.
KEY OBSERVATIONS
For the month of October 2023, the yield on the 10-year US Treasury Note ended at 4.93%, 36 basis points higher from the previous month. The Bloomberg US Corporate Index widened by 8 basis points to 1.29% over Treasuries. The A Rated Corporate Credit Spread increased by 8 basis points to 1.13%. The BBB Rated Corporate Credit Spread increased by 9 basis points to 1.56%.
With interest rates reaching levels not seen since since 2007, divergent outlooks are increasing. On the one hand, a recent article noted that some money managers are betting against the corporate and high-yield bond markets by shorting the larger and more liquid exchange traded funds (source: Bloomberg
10/16/23).
KEY OBSERVATIONS
For the month of September 2023, the yield on the 10-year US Treasury Note ended at 4.57%, 46 basis points higher from the previous month. The Bloomberg US Corporate Index widened by 3 basis points to 1.21% over Treasuries. The A Rated Corporate Credit Spread increased by 4 basis points to 1.05%. The BBB Rated Corporate Credit Spread increased by 3 basis points to 1.47%.