• Recent weeks have seen markets digest a patch of relatively disappointing economic data, including slowing payroll growth, softening inflation data and a decline in oil prices.1,2,3 Within this context, investors have begun to question whether the FOMC will raise interest rates again in 2017 after next week’s meeting and widely expected rate hike.
  • Yields on the 10-year Treasury note fell to a post-election low of approximately 2.14% this week before moving back above the 2.20% mark.4
  • Persistently low government bond yields in the U.S. and around the globe have helped to reinforce the strong demand that has underpinned U.S. credit markets in recent years, steadily lowering yields across many asset classes.
  • Yields on investment grade bonds are 54 basis points below their recent peak in February 2016 while yields on high yield bonds have dropped approximately 458 basis points in the same time frame.5,6 According to J.P. Morgan, nearly 70% of high yield bonds currently yield 6% or below.7
  • Despite a temporary post-election bounce, credit markets currently appear to show no signs of breaking out of the so-called “new normal” conditions of recent years in which yields and economic growth have both remained persistently low.

1 Bureau of Labor Statistics, http://bit.ly/2hbEN7I.
2 Bureau of Economic Analysis, http://bit.ly/2mOhSP0.
3 West Texas Intermediate Cushing Crude Oil Spot Price.
4 Bloomberg.
5 Bank of America Merrill Lynch High Yield Master II Index.
6 Bank of America Merrill Lynch Corporate Master Index. 
7 J.P Morgan High-Yield and Leveraged Loan Morning Intelligence, June 8, 2017.

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