If you were away in August, you didn’t miss much. For the month, Treasury yields changed very little, with most points along the curve increasing by 3-9 basis points. Even though that may not seem like much of a change, low starting yields result in minor changes affecting bond prices more than usual. As a result, the Bloomberg Barclays Intermediate Aggregate Index turned in a total return of -0.16% for the month.
The “big” news in August was Fed Chair Powell’s speech after the central bank conclave in Jackson Hole, although the meeting was virtual this year due to the increasing caution over in-person gatherings. This annual meeting of the world’s top monetary policymakers always receives a good deal of attention but seldom follows through with anything terribly noteworthy. Powell’s comments confirmed the likelihood that a reduction in the Fed’s monthly asset purchases, the “tapering” we have mentioned before, could begin later this year. He also reiterated his expectation that inflation will prove transitory, explaining how multiple factors have conspired that have resulted in elevated inflation measures but that most should subside in coming months.
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