Is It 'Wait Till Next Year' for QE Taper?

If the FOMC does not make a change in policy at its next meeting, the committee's credibility will erode further, but it's also possible a taper might not happen until March

Dave Sekera, CFA 24 September, 2013 | 9:49AM

This content was first published on All mentions of Treasury bonds refer to US T-bonds, although the sentiment regarding QE tapering affects global bond markets.

With the Federal Reserve refusing to dial down its highly accommodative easy money policy, corporate bond investors recaptured some of the losses they suffered earlier this year. As Treasury bonds rose last week, the Morningstar Corporate Bond Index rose 1.14%, though year to date, the index still registers a 2.99% loss. Most of the losses this year have been incurred from rising interest rates. 

In May, when the 10-year Treasury was well below 2%, we opined that as soon the Fed intimated that it would begin tapering its asset-purchase program, interest rates would quickly rise by 100-150 basis points. Since May, rates steadily moved higher, having risen about 125 basis points, and at their peak earlier this month reached almost 3%. The rising-interest-rate trend reversed course last week after the Federal Open Market Committee released its statement, which sent 10-year Treasury bond prices screaming higher, pushing their yield down 14 basis points to 2.73%.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author

Dave Sekera, CFA  is a senior securities analyst with Morningstar.

Audience Confirmation

By clicking 'accept' I acknowledge that this website uses cookies and other technologies to tailor my experience and understand how I and other visitors use our site. See 'Cookie Consent' for more detail.

  • Other Morningstar Websites
© Copyright 2020 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Cookies