Our format this month takes a slightly different approach. First, we provide some brief color on what transpired in the bond market last month. Next, we offer some comments on economic reports and what they portend for the future. Lastly, we present some brief commentary on each of the broad sectors of the investment grade bond market with the goal of providing you a comprehensive overview of the market as we see it from our seats.
Bond Market Review
- Yields on short maturities (under 5 years) moved 7-10 basis points higher, while yields on longer maturities fell by 8-14 basis points. The resulting total return for the broad market as represented by the Bloomberg U.S. Intermediate Aggregate Bond Index was 0.04%
- Corporate bonds lagged a bit during the month. Yield spreads rose in response to the yield curve flattening as well as other technical factors.
- MBS performance did not keep pace with Treasuries and valuations remain in transition as the Fed begins to taper its monthly purchases.
- Municipal bonds were the star performers in November after three months of negative returns. Investor demand was strong since the threat of higher tax rates is real, while supply remains rather tepid.
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