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Track fixed-income opportunities with this monthly update.
One way to identify opportunities in fixed income is to look at bond yields. That’s because yield, which is based on a bond's price and coupon payments, reflects total return potential. Yields can change over time and across bond sectors.
Spread, which refers to the difference between a bond’s yield and the yield of a risk-free issue with the same duration (e.g., U.S. Treasuries),1 indicates how much investors are being compensated for taking on additional credit (default) risk. If spreads are above their long-term average (sometimes called "wide " or "cheap"), investors are being paid more to take on credit risk; if they're below their long-term average (called "narrow" or "tight"), investors are being paid less.
Our proprietary Fixed-Income Monitor compares yields and credit spreads over 20 years of history and across fixed income. It’s designed to help investors identify opportunities and risks in the asset class.
| Source: Columbia Threadneedle Investments as of March 29, 2024. Yield is represented by yield to worst, which is the minimum return received on a callable bond, apart from the yield if the issuer were to default. For municipal bonds, yield is represented by taxable equivalent yield, which is based on the top federal bracket (37%) and net investment income tax (3.8%). Other taxes are possible. Yield percentile and spread percentile are represented by the range of daily yields and daily spreads, respectively, and both are for the last 20 years, with the current percentile position indicated. Past performance is not a guarantee of future results. |
Key takeaways for April 2024
- Despite benchmark U.S. Treasury 10-year yields increasing over 20 basis points in response to hotter-than-expected inflation and labor market data, yields for intermediate and longer maturity Treasuries ended March lower.
- During the first quarter, corporations took advantage of capital market conditions to refinance outstanding debt at a historic clip. The high demand for corporates reflects attractive all-in yields and healthy risk sentiment, which drove credit spreads to near post-COVID tights.
- Treasuries and municipal bond yields moved in opposite directions, resulting in a slightly steeper municipal bond curve that offers investors better value for extending maturity.
