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The direction of inflation and interest rates are key to the performance of bond prices and they are in the midst of a massive change. The shift in direction has been most dramatic for inflation. After a decade of staying mostly below the Federal Reserve’s long-term 2% target, the Consumer Price Index recently soared nearly 8% year over year.
Meanwhile, until very recently interest rates have remained near historic lows. Despite telegraphing it would for months, the Federal Reserve just raised its key short-term federal funds rate for the first time since 2018. And the short-term interest rate sensitive yield on the 2-year treasury note has risen accordingly while the longer-term 10-year Treasury yield has been more subdued.
It now remains to be seen how aggressively the Federal Reserve will raise interest rates to dampen economic activity and rein in inflation. Its decisions will heavily influence the performance of bonds not just in the U.S. but also in the rest of the world.
This week’s guest will update us on the prospects for the bond markets but also on the increasing influence of his specialty, sustainable bond investing, on performance.
Steve Liberatore, a pioneer in ESG and impact bond investing explains what the new bond era means for investors in general and sustainable investing in particular.
WEALTHTRACK Episode #1839 broadcast on March 25, 2022
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- Lead Portfolio Manager, TIAA-CREF Core Impact Bond Fund
- Lead Portfolio Manager & Head of ESG / Impact – Global Fixed Income, Nuveen
LOOK TO WINSTON CHURCHILL FOR INSPIRATION DURING RUSSIA’S UNPROVOKED WAR AGAINST UKRAINE
- Read: The Splendid and the Vile: A Saga of Churchill, Family and Defiance During the Blitz, by Erik Larson
- Listen to: Never Give In! Winston Churchill’s Greatest Speeches
TOP VALUE AND GROWTH SECTOR
- World’s most liquid market
- Easy to buy and sell
- Own some 7-10 year maturities
- Global financial commodities
Stephen Liberatore from the WEALTHTRACK Archives:
SOCIAL IMPACT BONDS
Impact bond pioneer Steve Liberatore is excited about the new investment opportunities in what are called social bonds. He explains what they are and some of the projects they are financing.