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 10/25/22, its yield rose from 0.51% to 4.10%, or an increase of 359 basis points, based on the close of trading.    
3. As indicated in the chart above, the only debt category in positive territory for the period was leveraged loans (senior loans), which are floating-rate 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 18.82% over the same period, according to Bloomberg.   
5. Inflation remains elevated. The trailing 12-month CPI (Consumer Price Index) stood at 8.2% in September 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 10/25/22, the federal funds target rate (upper bound) stood at 3.25%, up from 0.25% this past March. The Federal Reserve has signaled via its dot plots that it is prepared to raise rates another 75 basis points at its next meeting scheduled for November 1-2. As always, investors will likely be listening closely for the Fed’s thoughts on where rates could be headed. Its last meeting for this year is scheduled for December 13-14. 
7. For comparative purposes, the federal funds target rate (upper bound) averaged 2.46% for the 30-year period ended 10/25/22, but did climb as high as 6.50% on 5/16/00. 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 Morningstar 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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