A changing sentiment is enveloping the bond markets, spooking investors. The 10- year Treasury began 2018 at 2.40%, below its 2017 March high of 2.63% (source: Bloomberg). This year its yield moved as high as 2.95% on 2/21/18, but finished the quarter at 2.74%.
Key Observations
For the month of April 2018, the yield on the 10-year US Treasury Note ended at 2.95%, 21 basis points higher from the previous month. The Bloomberg Barclays US Corporate Index tightened by 1 basis point to 1.08% over Treasuries. The A Rated Corporate Credit Spread decreased by 2 basis points to 0.88%. The BBB Rated Corporate Credit Spreads widened by 1 basis point to 1.39%.
Key Observations
For the month of March 2018, the yield on the 10-year US Treasury ended at 2.74%, 12 basis points lower from the previous month. The Bloomberg Barclays US Corporate Index widened by 13 basis points to 1.09% over Treasuries. The A Rated Corporate Credit Spread increased by 12 basis points to 0.90%. The BBB Rated Corporate Credit Spreads widened by 15 basis points to 1.38%.
Key Observations
For the month of February 2018, the yield on the 10-year US Treasury ended at 2.86%, 15 basis points higher from the previous month. The Bloomberg Barclays US Corporate Index widened by 10 basis points to 0.96% over Treasuries. The A Rated Corporate Credit Spread increased by 9 basis points to 0.78%. The BBB Rated Corporate Credit Spreads widened by 11 basis points to 1.23%.
Key Observations
For the month of January 2018, the yield on the 10-year US Treasury ended at 2.71%, 30 basis points higher from the previous month. The Bloomberg Barclays US Corporate Index tightened by 7 basis points to 0.86% over Treasuries. The A Rated Corporate Credit Spread decreased by 4 basis points to 0.69%. The BBB Rated Corporate Credit Spreads tightened by 12 basis points to 1.12%.
As a Corporate Bond Manager we often receive inquiries regarding our thoughts on the Bank Loan Market especially in the current interest rate environment where the 10-year US Treasury Bond yield has increased 1% over the last 9 months. We believe that the asset class may warrant a place in an investor’s asset allocation and complement other credit sectors such as Investment Grade Corporates and High Yield but we suggest exercising caution, as all loans are not created equal.
It is common for individual fixed income investors to construct portfolios utilizing a “ladder” strategy, purchasing bonds over a specific time frame, 5 or 10 years for example, and in equal installments – an issue coming due each calendar year. This approach is fairly straight forward; however, we find that investors pursuing this type of strategy give up potential return.
Key Observations
For the month of December 2017, the yield on the 10-year US Treasury ended at 2.41%, unchanged from the previous month. The Bloomberg Barclays US Corporate Index tightened by 4 basis points to 0.93% over Treasuries. The A Rated Corporate Credit Spread decreased by 3 basis points to 0.73%. The BBB Rated Corporate Credit Spreads tightened by 4 basis points to 1.24%.
Key Observations
For the month of November 2017, the yield on the 10-year US Treasury ended at 2.41%, 3 basis points higher from where it began. The Bloomberg Barclays US Corporate Index widened by 2 basis points to 0.97% over Treasuries. The A Rated Corporate Credit Spread increased by 2 basis points to 0.76%. The BBB Rated Corporate Credit Spreads widened by 3 basis points to 1.28%.
Key Observations
For the month of September 2017, the yield on the 10-year US Treasury ended at 2.33%, 21 basis points higher from where it began. The Bloomberg Barclays US Corporate Index tightened by 9 basis points to 1.01% over Treasuries. The A Rated Corporate Credit Spread decreased by 8 basis points to 0.80%. The BBB Rated Corporate Credit Spreads tightened by 11 basis points to 1.31%.