Head of Fixed Income, Portfolio Manager
Head of Fixed Income Mike Sanders joined Schwab Network to discuss why Treasury’s expanded bond buyback program won’t solve the underlying pressure on yields.
Mike called the move “just a band-aid,” pointing to fiscal issues and higher inflation tied to Middle East tensions as the real drivers behind rising rates. More broadly, he sees promising opportunities within intermediate bonds, adding “it’s a great time to buy bonds” now that “you have a lot of income back in fixed income.”
Upon request, Madison may furnish to the client or institution a list of all security recommendations made within the past year.
In addition to the ongoing market risk applicable to portfolio securities, bonds are subject to interest rate risk, credit risk and inflation risk. When interest rates rise, bond prices fall; generally, the longer a bond’s maturity, the more sensitive it is to this risk. Credit risk is the possibility that the issuer of a security will be unable to make interest payments and repay the principal on its debt. Bonds may also be subject to call risk, which allows the issuer to retain the right to redeem the debt, fully or partially, before the scheduled maturity date. Proceeds from sales prior to maturity may be more or less than originally invested due to changes in market conditions or changes in the credit quality of the issuer.
Although the information in this report has been obtained from sources that the firm believes to be reliable, we do not guarantee its accuracy, and any such information may be incomplete or condensed. All opinions included in the report constitute the authors’ judgment as of the date of this report and are subject to change without notice.
Bond Spread is the difference between yields on differing debt instruments of varying maturities, credit ratings, and risk, calculated by deducting the yield of one instrument from another.
Duration is a measure of the sensitivity of the price of a bond or other debt instrument to a change in interest rates. Duration measures how long it takes, in years, for an investor to be repaid the bond’s price by the bond’s total cash flows.
The federal funds rate is the target interest rate range set by the Federal Open Market Committee (FOMC) for banks to lend or borrow excess reserves overnight. It influences monetary and financial conditions, short-term interest rates, and the stock market.
Yield Curve is a line that plots yields (interest rates) of bonds having equal credit quality but differing maturity dates. The slope of the yield curve gives an idea of future interest rate changes and economic activity. There are three main types of yield curve shapes: normal (upward-sloping curve), inverted (downward-sloping curve), and flat. A flat yield curve is one in which short-term bonds have yields similar to longer bonds.
Volatility is the degree of variation of returns for a given security or market index.
