Volatile Investment Grade Bond Market Creates Opportunities

The wild ride that has been the investment grade bond market in May and June 2013 reached new heights in volatility and rates last week.  The 10yr municipal index (MMD) traded 20 basis points higher in yield inter-week, only to end the week lower in yield than where we began.  Corporate bonds issued by financial companies (e.g. Bank of America and AIG), high-grade taxable municipal bonds (e.g. Energy Northwest, Arizona State University), and government-backed mortgages all experienced similar swings in yield.  With volatility comes opportunity as our fundamental research gives us the ability to identify mispricing among individual securities.  We understand why bond price swings concern our client’s, but please know that these are the markets we as portfolio managers enjoy as there are bargains to be had and chances to increase yield for our client’s portfolios.