Bonds Analysis by Brian Gilmartin covering: United States 2-Year, United States 10-Year, United States 30-Year, U.S. 20-Year. Read Brian Gilmartin's latest article on Investing.com
Here’s the issue with all of the social media and the volumes of research on the bond markets: it’s not just whether interest rates are rising or falling, the shape of the Treasury yield curve matters much for total return, at any given time.
Since 1995 was my last position as a bond / fixed-income / credit analyst, within a money-management setting, I reached out to a bond fund manager who has managed high-grade and high-yield corporates for 30 years for help, someone who is still managing bond money in an institutional setting, and asked him what are the long-term “average” spreads for the fed funds and 2-year Treasury spread to the 10-year and 30-year Treasury yields.
Looking back at 2019, the last time the FOMC and Chair Powell cut the fed funds rate, the TLT, the iShares +20-year Treasury ETF, returned 14% that year, trading from $120 on 12/31/18 to $148.90 at its peak and then ending the year at $137 – $138.
Investors could be faced – with yield curve “normalization” – with a period where short rates fall and the longer end of the Treasury yield curve doesn’t rally and remains fairly stagnant.
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