Dedicated to Fixed Income Investing

Resilience Abounds

For 4Q, the JP Morgan Leveraged Loan Index returned +3.78%, bringing the 2020 return to +3.19%, but loans drew more attention in early January as rates rose. The ICE BofA US High Yield Index had a 6.48% return. The confluence of election results and COVID vaccine announcements set the stage for a powerful rally, led by companies with strong business models and a significant liquidity runway to deal with the pandemic.

Will Fiscal and Monetary Policies Make America Reflate Again?

For all the uncertainty about the pandemic, elections, and fiscal support from Washington, the fourth quarter of 2020 saw a liquidity driven rally led by the lowest quality, highest beta parts of the investment grade taxable market. According to Deutsche Bank, 38 of the 39 asset classes it follows were up in the quarter, very much like 4Q19.

Record Liquidity and Leverage as Pandemic Election Nears

Rate volatility really disappeared over the third quarter with the front end of the yield curve anchored by the Fed's intentions to not do anything with rates for at least three years.