3RD QUARTER FIXED INCOME
The bond market had been relatively stable in the first half of the year, but bond prices took a strong hit as investors accepted the reality of rising interest rates and potentially steeper inflation. The yield on the 10-year Treasury was 3.05% at the end of September – versus 2.84% at the end of March. (Yields move inversely to prices.) It rose to 3.22% in the first week of October.
Other Investments: Our repeated aversion to bonds with long maturities remains firm. We still believe the risk of a sharp decline in prices is too great a risk for our clients. We prefer to find alternative investments such as real estate limited partnerships, demand notes, and municipal tax liens. We also note that interest rates of 2% and higher make cash a more attractive asset class than in recent years.