• Fed purchases have helped to quell volatility across the fixed income market as the COVID-19 health crisis began to spread throughout the U.S. The MOVE Index, which measures expected rate volatility within the Treasury market, has fallen from a peak of 164 to approximately 54 today.1    
  • Though credit market volatility may be more settled now, investors’ search for income has become more challenged than ever as rates have transitioned from a low-yield environment to an almost no-yield one.
  • The Barclays Agg is delivering approximately just 1.3% of income while the 10-year U.S. Treasury yields a paltry 0.69%, only slightly above its historic low of 0.57% on March 9.1
  • As low as the 10-year yield is today, it actually offers a slight yield premium versus other major government bonds, as the chart highlights. U.K. 10-year government bonds yield just 0.25% while German 10-year government bonds feature negative yields. 
  • Today’s global rate environment highlights the fact that investors’ search for competitive income will likely remain more important than ever in the coming years. Importantly, it also contrasts sharply with equity investors’ recent optimism that the U.S. will experience a relatively rapid economic recovery as states begin to reopen their economies.

1 As of May 7, 2020. MOVE Index refers to the ICE BofAML U.S. Bond Market Option Volatility Estimate Index. Barclays Agg refers to the Bloomberg Barclays U.S. Aggregate Bond Index.
2 Federal Reserve Bank of St. Louis, as of May 7, 2020.

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