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  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. The dates in the chart are from prior posts.  
  2. The Federal Reserve's ("Fed") federal funds target rate (upper bound) stood at 1.75% on 7/19/22, according to data from the Fed. The Fed has signaled it will likely raise the benchmark lending rate by 75 basis points at its next meeting on July 27, which would take it to 2.50%. The Fed has also left the door open for a potential 100 basis point hike. We’ll see.  
  3. For the 30-year period ended 7/19/22, the federal funds target rate (upper bound) averaged 2.46%, in line with the 2.50% figure expected on 7/27, according to Bloomberg. It reached as high as 6.50% in May 2000.
  4. The yield on the benchmark 10-year Treasury note (T-note) stood at 3.03% on 7/19/22, up from 1.46% on 12/15/21, according to Bloomberg. Its average yield was 3.94% for the 30-year period ended 7/19/22. 
  5. For comparative purposes, here were the closing yields for the indices featured in the chart as of 7/19/22: 7.25% (U.S. Leveraged Loan 100); 8.39% (U.S. High Yield Constrained); 4.33% (22+ Yr. Municipal Securities); 6.25% (Fixed Rate Preferred Securities); 3.03% (7-10 Yr. U.S. Treasury); 3.62% (Freddie Mac Mortgage); 4.74% (U.S. Corporate ); and 4.25% (Global Corporate), according to Bloomberg.
  6. All of the major debt categories in the chart are down significantly since 12/15/21.  
  7. The trailing 12-month Consumer Price Index (CPI) rate stood at 9.1% in June 2022, according to the Bureau of Labor Statistics. That is up from its 5.4% reading in June 2021 and significantly higher than its 2.4% average rate over the past 30 years.
  8. The yield on the 10-year T-note has topped the 3.00% mark on two other occasions (2013 & 2018) over the past decade, but not for long. Will this time be different? 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 anindex. 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 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 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 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 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 Global Corporate Index tracks the performance of investment grade corporate debt publicly issued in the major domestic and Eurobond markets. 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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Posted on Thursday, July 21, 2022 @ 11:03 AM • Post Link Print this post Printer Friendly

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.
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