3RD QUARTER FIXED INCOME
Fixed Income Market: Higher interest rates are not good for the bond market. The yield on the 10-year U.S. Treasury Note (which moves inversely to prices) was 4.572% at the end of September versus 3.818% at the end of June. The Bloomberg U.S. Aggregate Index – composed of Treasury, mortgage-backed, and corporate bonds – was down almost 3% for the quarter and 1.1% for the year.
Other Assets: Our aversion to long-term bonds remains and is reinforced by the inflationary situation. 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.
Also, for some clients, we look at alternative investments through Broadly Syndicated Loan vehicles and Collateralized Loan Obligations which can provide investors with greater security through collateral, yields, and a hedge against inflation through floating rate structures.