Municipal Bond Forum
Quality first
Q
Regarding your laddering article, you presumably don’t have a problem with “chasing yield,” assuming good credit quality. If the concern is quick Fed tightening, would you still go long now?
A
James A. Klotz responds:
I think we agree with your conclusion as long as “chasing yield” does not imply sacrificing credit quality.
As we said, interest rate forecasting is a dangerous game. There have been many occasions over the years that “Fed tightening” has led to lower long-term interest rates.
Tightening, by the way, often sends a signal to the markets that the Fed is being diligent in combating inflation and will slow the economy, causing long-term interest rates to decline.
We feel investors should buy bonds when investment funds are available. Timing interest rates is too difficult. No one rings a bell when it is time to buy.
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