Fed lowers rate - bonds drop?

[socca]

I don't understand why the yields (each is a data point?) you list for different types of bonds are referred to as a curve.

The maturity vs. yield data is often display as - and referred to - as a curve. Somewhere on the web there was (and maybe still is) an applet that shows how the Treasury yield curve has fluctuated over the last 40 years or so. It's a dynamic beast. Since I'm fond of VG muni funds, I track that particular yield curve.

Vanguard's muni fund yield curve for 11-21-2008:
+ money market: 1.25% <-- continues to drop like a rock
+ short-term: 2.72%
+ limited-term: 3.23%
+ intermediate-term: 4.19%
+ long-term: 4.62%
+ high-yield: 5.40%

 

[dex]

I've been trying to figure the bond market for a while now. My best guess is that the poor retail sales that were reported on Friday, on top of the problems in the auto industry and the large layoffs at Sun increased the fear of defaults, even among the higher rated bonds. Thus the only bonds that have seemed like a safe haven are the treasuries, which went up. Makes sense to me.

That sounds good to me. The only thing I would add is that Treasuries and the US$ are now a flight to safety play.
Expect them both to fall after the liquidity crisis is over.

 

[TromboneAl]

Somewhere on the web there was (and maybe still is) an applet that shows how the Treasury yield curve has fluctuated over the last 40 years or so.

The Living Yield Curve at SmartMoney.com

 

[socca]

Vanguard's muni fund yield curve for 12-19-2008:
+ money market: 1.03%
+ short-term: 2.41%
+ limited-term: 3.03%
+ intermediate-term: 4.13%
+ long-term: 4.74%
+ high-yield: 5.57%

Including the high-yield fund as part of this yield curve is mixing apples and oranges as far as muni bond quality goes, but I include it nevertheless just for fun.

 

[socca]

Vanguard's muni fund yield curve for 1-9-2009:
+ money market: 0.94%
+ short-term: 2.30%
+ limited-term: 2.85%
+ intermediate-term: 3.86%
+ long-term: 4.37%
+ high-yield: 5.28%

We seem to be in the middle (or start, or end) of a little rally in munis. Vanguard's quoted NAVs are strengthening for all muni bond fund durations and ratings. Folks may have decided that the additional return provided by munis relative to Treasuries are worth the additional risk. The talking heads in the media are starting to sing the praises of munis (most recently, Bill Gross at PIMCO), so maybe that's a sell signal. I'm holding onto mine, thanks.