Over the last few days Georgia, Philadelphia, the Metropolitan Transportation Authority in New York and others have delayed sales of new bonds, citing the precipitous plunge in prices that is driving up interest rates.
Past asset-buying programs by central banks, like the European Central Bank's decision to buy Spanish and Italian bonds last fall, have helped stop precipitous market declines.
But the precipitous fall in the value of mortgage-backed bonds was spurred by a mad rush by so many holders to dump them simultaneously.
The yield on the 30-year Treasury bond also fell, dropping from its recent precipitous highs to 5.946%.
I'm back from a couple of weeks on the road, and was greeted on my return by the precipitous rise in the interest rate on long-term U.S. bonds — in less than a week, the yield on the ten-year note jumped more than fifty basis points (in layman's terms, it rose more than half a percentage point), which is a huge move for an asset as theoretically stable as a U.S. government bond.
The Fed is slowly cutting back the monetary morphine at its meeting on January 29th it cut its monthly bond-buying by another $10 billion but the odds of precipitous tightening are small.
Some retired clients are mainly in income-producing investments like bonds that have chugged merrily along during the market's precipitous fall.
In 2008, the U.S. experienced the precipitous crash of what had been a highly overvalued real estate and associated bond market.
The precipitous decline of technology stocks in recent months is also contributing to the high-yield bond market's woes.
Since then, the bond market is indeed in negative territory, although its fall hasn't been precipitous.
"We expect economic slowing and belt-tightening, but we don't see this falloff as being as precipitous as it was in 2001," says Robert Kurtter, a managing director at Moody's muni bond rating service.
