A Shift in the Fixed Income Space

There has been a big shift in the fixed income space over the past three weeks.  2020 was an absolute roller coaster for bonds.  To start the year with corporations flush with cash from the tax cuts, companies were calling bonds and not interested in maintaining debt unless they had to.  Not just finding decently priced bonds, but keeping them was incredibly difficult.  In March when the market pulled back, investors left the bond space as well in record levels.  They left not just bad bonds, but good bonds.  Yields went down, the curve inverted, and the spreads got extremely wide.  This was a ideal time to step in and to buy bonds.  Weeks before it was hard to buy bonds, and then all of the sudden they were wildly available at discounted prices.  With the rally in the equity market, bond prices have stabilized and risen.  They spreads have again narrowed, and it’s once again very difficult to find well priced bonds.  If the market pulls back again, it will be interesting to see if the price volatility again picks up, and a savvy investor could step in and pick up some really well priced bonds.  Watch this space.