View from the Observation Deck

1. The yield on the 10-year Treasury note (T-note) closed at an all-time low of 0.51% on 8/4/20, according to Bloomberg.
2. From 8/4/20 through 9/23/22, its yield rose from 0.51% to 3.69%, or an increase of 318 basis points, based on the close of trading.
3. As indicated in the chart above, the only debt category in positive territory for the period was leveraged loans (senior loans), which are floating-rate speculative-grade securities.
4. Emerging market bonds and intermediate-term global government bonds were deep into negative territory for the period captured in the chart. The strength in the U.S. dollar definitely had a negative impact on the performance of foreign bonds, in our opinion. The U.S. Dollar Index (DXY) rose by 21.21% over the same period, according to Bloomberg.
5. Inflation remains elevated. The trailing 12-month CPI (Consumer Price Index) stood at 8.3% in August 2022, up from 1.3% from August 2020. The CPI is at a level not seen since 1982, according to data from the Bureau of Labor Statistics.
6. As of 9/23/22, the federal funds target rate (upper bound) stood at 3.25%, up from 0.25% this past March. The Federal Reserve has signaled via its dot plots that it is prepared to raise rates another 75 basis points at its next meeting scheduled for November 1-2.
7. For comparative purposes, the federal funds target rate (upper bound) averaged 2.46% for the 30-year period ended 9/23/22, but did climb as high as 6.50% on 5/16/00. Stay Tuned!