white papers

Liquidity Risk

Imagine a crowded room with just one exit. If everyone suddenly had to leave, those close to the exit would be fine, but it would be chaotic for others. This is similar to bond liquidity, which is like the available exits. When bonds are highly liquid, investors can smoothly come and go without a hitch. But when liquidity is low, it's like many investors trying to exit through one door. This article delves into bond market liquidity and its effects.

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Municipal Bonds

Municipal bonds make up nearly 10% of the investment grade bond market. The $4 trillion in municipal debt is issued by government entities to cover expenses and finance projects that significantly benefit the public. This paper provides an overview of Municipal Bonds, highlighting their tax advantages, illustrating with examples, and exploring their intricacies.

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Credit Analysis

History has taught us that even highly-rated bonds can quickly experience deteriorating credit quality and wreak havoc on a portfolio. Naturally, credit quality becomes a focus in weakening market conditions, but the importance of credit research in all market conditions must be considered.

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Cash and Money Market Funds vs. Bonds: Which is Better?

Cash–including money market funds, high-yield savings accounts, and short CDs–and bonds are all perceived to be relatively “safe” investments, but differ in terms of their risk level and return potential. With some cash accounts yielding as much or more than bonds, some investors may be questioning which asset is better.

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Opposite Ends of Value: The Hidden Risks in Value Indexing

Morningstar’s push years ago to get our industry thinking in terms of the nine style boxes continues to provide a framework for differentiating investment options. However, if you dig deeper, it’s far more complex than just the nine style boxes. The constituents of a single style box can present vastly different investment prospects. This white paper proposes a style spectrum and discusses hidden risks in value indexing.

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Bond Concepts Series

Learn the nuances of fixed income investing, including the risks, opportunities, and investment styles.

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Why Bonds Now?

Traditionally, fixed income has played three important roles in an asset allocation: principal preservation, steady income, and risk reduction. After pandemic-induced monetary and fiscal stimulus, the appeal of bonds had diminished some. The ability to preserve principal remained intact, but low yields meant that income was not keeping up with inflation and the prospect of a rising rate environment meant elevated interest rate risk with limited downside protection. Today, these key attributes of bonds have returned, and investors can again expect their fixed income allocation to fulfill its traditional role in a portfolio.

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Yield To Maturity (YTM): The Yield That Matters

In fixed income investing, there are several different ways to measure an individual bond’s ability to produce income. Three of the most often cited measures are a bond’s coupon rate, current yield, and yield to maturity. Each measure has its place, but which matters the most?

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