Magazine article Black Enterprise

In Search of Bond Opportunities

Magazine article Black Enterprise

In Search of Bond Opportunities

Article excerpt

Investors should consider high-grade fixed-income securities

Watching the performance of the bond market in 1999 was like bearing witness to a three-car collision. Your best hope, of course, was that you weren't one of the investors who got to view the wreckage from the passenger's seat.

U.S. Treasuries were battered worse, with the 30-year bond down 14% for the year. And most fixed-income players are not overly enthusiastic about the prospects for 2000. Says Vicki Fuller, senior vice president, Alliance Capital, Secaucus, New Jersey, in her outlook of the bond market for the coming year: "I'm not bullish on the Treasury market; I'm concerned about increases in interest rates."

Interest rate concerns and inflation fears continue to drive all markets, giving investors the jitters. However, as the year began, T-bonds rallied as the stock market continued its trademark volatility. For instance, in late January, many investors fled to safety by buying five-year and 10-year Treasuries as the stock market declined. On January 24, the tech-driven Nasdaq composite index slid 139.32 points, the fourth-worst point decline ever, to 4096.08, while the Dow Jones industrial average fell 243.54 points. Due to the bond shift, the bellwether 30-year Treasury rose 20/32, or $6.25 for a bond with a $1,000 face value, and its yield, which moves inversely to price, dropped to 6.64%. (Before the rebound, the yield had been as high as 6.75%.) By week's end, the yield of the 30-year bond stayed below that of the 10-year bond and five-year note--a development known as a yield inversion--and came close to falling below the two-year note. …

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