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| NAV of total bond market is already down almost 2% in a month. |
So says James B. Stewart here in The New York Times, who notes Bill Gross of PIMCO fame manages a corporate bond/MBS fund which is already down well over 10%:
The sell-off in fixed income began slowly on May 10, an otherwise uneventful day with no obvious catalyst for any change in sentiment. It picked up steam when Fed sources didn’t step forward to calm markets. Then, in comments to Congress on May 22, Mr. Bernanke said, “We could in the next few meetings take a step down in our pace of purchases.”
That set off alarm bells, in contrast with his prepared text, which gave no suggestion that the Fed’s policy would change so soon. And then, the minutes of the Fed’s May meeting suggested that some Fed governors were prepared to start tapering off bond purchases as soon as the Fed’s next meeting, which will be June 18 and 19. Near-panic selling in some markets ensued.
. . . the simplest and safest approach [may be] simply to park funds in a low-volatility money market fund and accept near-zero returns.
