Last week's stock-market rally helped to erase the month's sharp early losses, but probably made it more difficult for bondholders. The sharp drop in the last 15 minutes of trading on Friday did erase a good part of the week's gains.
Importantly, mortgage rates jumped the most in over 26 years last week. While they are still at historically low levels, bondholders and the largest bond-fund managers remain nervous.
Last week started off with another jolt, as overnight lending rates in China spiked to well over 10% in an effort to clamp down on their hidden banking system. The chart reveals that this was a breakout from a yearlong trading range (line a).
So what is a bondholder to do in this environment?
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