iShares iBoxx $ Investment Grade Corporate Bond ETFArca
Description
⋅
A Catch-22 is a problem for which the only solution is denied by a circumstance inherent in the problem or by a rule. This is exactly the problem the Federal Reserve faces.
Historic inflation continues to accelerate, becoming embedded into the market's expectations and risking a spiral effect
In order to stop rapid inflation, and achieve its mandate of price stability, the Fed must raise interest rates as rapidly as inflation is rising.
The Fed cannot raise interest rates as rapidly as would be needed to slow rapid inflation because it would rapidly begin to freeze liquidity in the corporate bond market.
Rapid tightening would spillover to corporate earnings, asset prices, consumer borrowing and spending, economic growth and ultimately employment, countering the Fed's mandate of maintaining stable employment.
The last time that investment grade corporate bond prices fell below their monthly EMA ribbon support was in March 2020, when the Fed made emergency purchases of corporate bond ETFs to ensure liquidity. Now the bond prices are falling below their monthly EMA ribbon support and the Fed is taking the exact opposite measure by calling for accelerated rate hikes.
Is it possible to avoid a recession at this point? Only time will tell but the charts seem to doubt it.
It's unreal that over a half year after breaking through support, corporate bonds are still crashing.
Brivax
⋅
@spy_master why corporate bonds are crashing? its a fixed income , higher than current interests rate.
SpyMasterTrades
⋅
@Brivax, Corporate bond prices are crashing because their yields are going up. Since corporate bonds are some degree riskier than Treasuries, corporate bond yields must go up when the Fed hikes interest rates. So their price decline has to do with the Fed's rapid tightening.
T-r-X
⋅
Federal Reserve sold those Corporate Bond etfs in June-July 2021.