<The bond markets (to the extent that they are not irresistibly manipulated and distorted by Federal Reserve market activities) are very sensitive to any changes in the rules applying to any class of bonds. In a very real sense, the bond markets are the macroeconomic picture.>That's why I post the High Yield CCC or Below Option-Adjusted Spread (junk bonds) in the Control Panel. These bonds are sensitive to the economic picture because the junk companies are more likely to default in a down economy. The Fed never touches this market. Right now, the junk bond market is complacent and getting more so, though still higher than 2004-8.http://research.stlouisfed.org/fred2/series/BAMLH0A3HYC <I remember what happened in the Fall of 2008. It was a bond bloodbath.>Now you are making me feel like a vampire! Remember how I posted charts and recommended TIPS in October 2008 when the Treasury-TIPS spread inverted?Every investor is different, but it's safer to buy government-guaranteed debt during a bloodbath (unsafe to buy during a bubble). Same for stocks -- safer to buy solid, financially-strong companies during a market meltdown than during a period of rich valuation.Wendy
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