3RD QUARTER FIXED INCOME

Fixed Income Market: The monetary tightening by the Fed has sent bond yields surging, hurting bond prices, and eliminating the hedge that bonds often offer against stocks. Some analysts observed that it has been 50 years since stock and bond prices fell this much in unison.  The yield on the benchmark 10-year U.S. Treasury Note (which moves inversely to prices) ended on September 30 at 3.873% up from 1.496% at the end of December. The Bloomberg U.S. Aggregate Bond Index was down more than 16%, its worst year since 1976.

 Other Assets: Our aversion to long-term bonds remains and is reinforced by the inflationary outlook. We like bond maturities under two years which now have higher rate returns than previous years. We like laddered investments with a mix of U.S. Government, municipal, and high- quality corporate bonds. We also like the new better-paying opportunities in money market funds.