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Strategies & Market Trends : Value Investing
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To: Wallace Rivers who wrote (50845)2/11/2013 3:33:44 PM
From: E_K_S  Read Replies (2) of 78476
 
Hi Wallace -

Bonds tend to move in price inversely with the 10 year U.S. treasury rate. The Fed's QE policy is artificially driving down the 10 year treasury yield lower making your municipal bonds increase in value. Over the last few days the 10 year yield surpassed the 2% ceiling rate making several of the bond fund fall in value.

You can monitor the daily 10 year treasury yield here:

It looks like the Fed's buying and concerns in Europe has made the 10 year treasury yield drop back below 2% again. I see it is now at 1.99%.

Longer term if/when the Fed eases off their QE program, the 10 year rate will rise maybe up to 4%. This gradual move (the fed's exit strategy) may take five or more years to do. Everybody is speculating when it will start. If you own a lot of bond funds, you need to be close to the exit door.

EKS
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