A recent article pointed out that bond ETFs are trading at meaning discounts to their internet property values inwards many cases, making them similar closed-end funds. While increased volatility inwards the stock marketplace has gotten nigh the press, the volatility inwards fixed income has been as significant, as nosotros tin lavatory meet amid municipal bonds (MUB; peak chart); investment cast corporate bonds (LQD; middle chart); as well as 10-year Treasury yields ($TNX; bottom chart).
Note how prices for muni as well as corporate bonds accept moved sharply lower as well as how longer-term Treasury yields accept of late moved significantly higher. No dubiousness investors accept been liquidating positions to instruct into cash, merely the rising inwards yields may too accept something to produce amongst inflationary expectations inwards the aspect upwardly of massive rescue plans as well as beak of large, costly economical stimulus packages.
In the interim, muni bonds maintain to yield to a greater extent than than Treasuries, fifty-fifty earlier considering their tax-free feature. This mightiness move a rare chance to buy, or it mightiness move a harbinger of defaults to come. Even apart from forced liquidations, it's hard to stride upwardly to the plate as well as lend to municipalities inwards the aspect upwardly of falling holding revenue enhancement revenues as well as reduced sales revenue enhancement revenues inwards a weak economy. And that is creating considerable insomnia amid bond investors.
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