Groups Fight to Preserve Tax-Exempt Status of Municipal BondsETF Trends is now VettaFi. Read More --For what municipal bonds lack in terms of exciting return profiles, the asset class makes up for with other advantages. Those include low volatility, reliable income and a variety of tax advantages that make these bonds appealing to retirees and high-net-worth investors. This is particularly true for those living in states with elevated tax burdens.The issue with tax advantages is that existence of those bene ...

Core Viewpoint - The bond market is experiencing a consolidation phase, with fluctuations in long-term bonds and stability in medium-term bonds, while the focus is on supply and demand dynamics affecting yield rates [1][7]. Market Performance - Government bond futures closed mostly flat, with the 30-year main contract down 0.33% at 112.09, while the 10-year, 5-year, and 2-year contracts remained unchanged [2]. - The yield on the 10-year government bond increased by 0.55 basis points to 1.8305%, and the 30-year bond yield rose by 1.55 basis points to 2.2575% [2]. International Bond Market - In North America, U.S. Treasury yields fell across the board, with the 10-year yield down 0.99 basis points to 4.211% [3]. - In Asia, Japanese bond yields mostly increased, with the 10-year yield rising by 4.5 basis points to 2.285% [4]. Primary Market - Agricultural Development Bank's 91-day and 5-year financial bonds had winning yields of 1.4896% and 1.7023%, respectively, with bid-to-cover ratios of 3.56 and 3.08 [5]. - The China Development Bank's 2-year, 5-year, and 10-year financial bonds had winning yields of 1.4877%, 1.7273%, and 1.9366%, with bid-to-cover ratios of 4.23, 3.24, and 2.45 [5]. Liquidity Conditions - The central bank conducted a 7-day reverse repo operation with a total of 4020 billion yuan at a rate of 1.40%, resulting in a net injection of 780 billion yuan for the day [6]. - Short-term Shibor rates mostly declined, with the overnight rate down 4.9 basis points to 1.371% [6]. Institutional Insights - Institutions highlight that the primary focus in the market is on the supply pressure of government bonds and the supply-demand dynamics, rather than just the central bank's liquidity measures [7]. - The current downward trend in interest rates is driven by a widening supply-demand gap, with banks increasing their allocations in the secondary market [8].

Core Viewpoint - The Hong Kong Special Administrative Region (SAR) Chief Executive, John Lee, announced that the RMB bond market in Hong Kong is expected to exceed 1 trillion RMB in 2024 and maintain this level in 2025, highlighting the market's continued vibrancy and growth potential [1] Group 1: Market Growth - The RMB bond market in Hong Kong is projected to surpass 1 trillion RMB in 2024 [1] - The market is expected to sustain this level in 2025, indicating stability and ongoing interest [1] Group 2: Financial Connectivity Initiatives - Hong Kong aims to deepen financial market connectivity between the mainland and itself [1] - Initiatives include the launch of offshore government bond futures and the expansion of interest rate derivatives under the "Shanghai-Hong Kong Stock Connect" and "Shenzhen-Hong Kong Stock Connect" programs [1]

Core Viewpoint - The Hong Kong SAR government anticipates that the RMB bond market will continue to thrive, with the market size expected to exceed 1 trillion RMB in 2024 and maintain this level in 2025 [1] Group 1: Market Activity - The RMB bond market in Hong Kong is described as continuously active [1] - The expected market size for 2024 is projected to surpass 1 trillion RMB [1] - The market is anticipated to sustain this level in 2025 [1] Group 2: Government Initiatives - The Chief Executive of Hong Kong, John Lee, emphasized Hong Kong's role as a gateway between the world and mainland China's development [1] - The government plans to explore measures to deepen the financial market connectivity between mainland China and Hong Kong [1] - Initiatives include the launch of offshore government bond futures and the expansion of interest rate derivatives under the "Shanghai-Hong Kong Stock Connect" [1]

Core Viewpoint - Japanese government bond yields and stocks experienced a decline as U.S. and Japanese authorities indicated readiness to intervene in the currency market to support the yen, leading to a rebound in the Japanese currency [1] Group 1 - Japanese government bond yields fell on Monday, reflecting market reactions to potential government intervention [1] - Stock prices in Japan also dropped, indicating a broader market response to currency stabilization efforts [1] - The yen showed signs of recovery following the announcements from U.S. and Japanese authorities, suggesting a direct impact on currency valuation [1]

Investment Opportunities - The Federal Reserve's interest rate cuts often signal a turning point for investors, making borrowing cheaper and prompting a shift towards higher return assets [1] - Rate cuts create distinct winners and losers across various asset classes, influencing investment strategies [1] Bonds and Bond Funds - The bond market is a primary beneficiary of falling interest rates, as existing bonds with higher interest rates become more valuable, leading to price increases [2] - Diversified bond funds allow investors to lock in current yields while providing potential upside if rates continue to decline, serving as a stabilizer in portfolios [3] - Long-duration bonds may offer the most benefit from rate drops but also carry higher risks if inflation rises [3] Growth Stocks and Technology Companies - Lower interest rates tend to support growth stocks, particularly in technology, as reduced borrowing costs enable cheaper investments in expansion and lower discount rates on future earnings [4] - Historically, growth stocks perform well during early phases of rate-cutting cycles, but performance is contingent on the economic context of the rate cuts [5] - Selective exposure to growth stocks is advised rather than blanket optimism due to potential uneven gains following economic slowdowns [5] Housing and Homebuilder-Related Investments - The housing market is highly sensitive to interest rates; falling rates typically lead to lower mortgage rates, enhancing affordability and stimulating market activity [6] - Homebuilders and companies related to building materials may benefit from increased demand and reduced financing costs, although rate cuts alone won't resolve all housing market challenges [7] Dividend-Paying and Income-Focused Stocks - With declining interest rates, income investors face lower yields from cash and bonds, making dividend-paying stocks more appealing as an alternative [8]

Barclays Research Some of the best performing US debt in the first weeks of this year is the lowest rated, implying that corporate defaults are low on the list of investor fears now. Debt rated in the CCC tier, the lowest ratings that commonly trade in the US, gained 1.15% this year through Thursday’s close on a total return basis. That’s better than just about every other kind of US debt, including other types of junk bonds. Treasuries are down about 0.2%, according to Bloomberg index data. Most Read ...

Core Insights - Investors are currently experiencing significant volatility in Japan's bond market, indicating potential shifts in interest rates and investor sentiment [1] - There is a notable rally in small-cap stocks, suggesting a growing confidence in smaller companies and potential opportunities for higher returns [1] - Prices for natural gas, gold, and silver are surging, reflecting increased demand and possibly inflationary pressures in the market [1]

Core Insights - The central bank's policy operations may lead to an increase in expectations for loose monetary policy, with the recent weak performance of long-term government bonds providing more room for subsequent rebounds as the 10-year government bond yield approaches the lower limit of 1.80% [1] Group 1: Central Bank Policy and Bond Market Trends - The bond market's performance is significantly influenced by monetary policy, with the market's trajectory divided into three phases since 2024, reflecting the central bank's verbal and operational guidance [2][15] - In the first phase, the bond market experienced a bull run, with the central bank emphasizing the need to align long-term bond yields with growth expectations, leading to a market adjustment [2][17] - The second phase saw a stronger policy intervention from the central bank, which effectively cooled the previously enthusiastic bullish sentiment in the bond market [3][18] - The third phase indicated a self-adjustment in the bond market, with the 10-year government bond yield stabilizing within a narrow range of 1.80% to 1.90%, suggesting that the current yield levels may be acceptable to the central bank [4][19] Group 2: Expectations for Loose Monetary Policy - Signals of monetary policy easing have gradually emerged, with the central bank indicating that there is still room for rate cuts and reserve requirement ratio reductions [5][20] - The government has accelerated the issuance of bonds, with cumulative issuance of 12,170 billion for 2026, the highest since 2021, indicating a proactive fiscal policy approach [5][24] - The liquidity needs of financial institutions are expected to rise, potentially leading to increased liquidity pressure on banks as government bond issuance continues at a rapid pace [5][24] Group 3: Long-term Yield Spread and Investment Opportunities - The performance of long-term government bonds has been significantly weaker than that of short-term bonds, creating a favorable environment for potential rebounds in long-term yields [8][26] - The spread between 30-year and 10-year government bonds reached approximately 50 basis points, the widest since 2023, suggesting that there may be opportunities for investors to capitalize on this spread as expectations for loose monetary policy grow [8][26]

Group 1: Treasury Yields and Economic Indicators - The yield on the 10-year Treasury note was 4.24% as of January 23, 2026, while the 2-year note was at 3.60% and the 30-year note at 4.82% [1] - An inverted yield curve occurs when longer-term Treasury yields are lower than shorter-term yields, which is often a precursor to recessions, with the 10-2 spread being a reliable leading indicator [2] - The average lead time to a recession based on the first negative spread date is approximately 48 weeks, while using the last positive spread date yields an average lead time of 18.5 weeks [4][6] Group 2: Mortgage Rates and Federal Funds Rate - The Federal Funds Rate (FFR) influences borrowing costs for banks, which typically affects mortgage rates; however, recent trends show mortgage rates declining despite the Fed's rate cuts starting in September 2024 [7] - The latest Freddie Mac Weekly Primary Mortgage Market Survey reported the 30-year fixed mortgage rate at 6.09%, marking one of the lowest levels since October 2024 [7] Group 3: Treasury ETFs - ETFs associated with Treasuries include Vanguard 0-3 Month Treasury Bill ETF (VBIL), Vanguard Intermediate-Term Treasury ETF (VGIT), and Vanguard Long-Term Treasury ETF (VGLT) [9]