The annual report of the Financial Stability Oversight Council, of which the Fed is a member, warned last week that a "sudden spike in yields and volatilities could trigger a disorderly adjustment, and potentially create outsized risk".
In its annual report issued on April 25th America's new Financial Stability Oversight Council (FSOC), a watchdog that includes the Fed, warned that a "sudden spike in yields and volatilities could trigger a disorderly adjustment, and potentially create outsized risks".
Given the rise in yields and their volatility, says Naka Matsuzawa, chief strategist at Nomura Securities, an investment bank, "you can say that the easing by the Bank of Japan has in one sense already failed".
Beating stocks with fat yields and less volatility: Richard Lehmann's "medium risk" fixed-income portfolio is up 38% year-to-date and yields 9.2%.
That's why I prefer to invest in muni bonds through closed-end funds (CEFs), which offer a heady mix of high, tax-advantaged yields and low volatility.
In the past these preferreds enjoyed higher yields and less volatility than bonds, mainly because large institutions don't bother to deal in such small issues.
The lower average rating and longer maturity range of the Vanguard index give the fund a higher yield, risk and volatility.
Ishaq Siddiqi, market strategist at ETX Capital said: After Bernanke's testimony and the Fed meeting minutes on May 22, risk assets have declined sharply while bond yields have spiked and volatility has shot through the roof.
Shortly afterwards Ms Yellen fretted about the "reach for yield" and subdued volatility, a sign of investors' complacency.In this section A narrow path Counting the cost of finance Yuawn Game of gnomes Hungry Hypo Burning at both ends Alone at last Zombie patents ReprintsFor Britain and America, the prospect of using interest rates to tackle financial imbalances remains hypothetical.
After the Bear Bust junk bonds sank, fear began to overshadow the factors that had propelled the high-yield market: the oceans of liquidity, zeal for yield and low volatility that produced minuscule spreads to Treasurys.
