“Bond yields rose in January to start the year off in similar fashion to 2020. A year ago, the bond market was reacting to the imminent rollout of vaccines which seemed to offer hope for an end to the pandemic. This year, even as the pandemic continues to rage, the bond market is contending with a pivot in Fed policy. By the end of March, monthly purchases of Treasuries and MBS will end, the first rate hike is expected to occur, and the beginning of balance sheet runoff will likely be a matter of months away. While much of this has been communicated through various means, the tone has turned more hawkish (translation: aggressive) than previously assumed by many market participants, sending yields higher (45 basis points higher on the two-year Treasury, 27 on the ten-year). As a result of all this, total return performance for the month as represented by the Bloomberg U.S. Intermediate Aggregate Index was -1.25%. Even the Bloomberg Municipal Bond Index had a tough month with a total return of -2.74%. “
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