Perhaps those errant reports of a Goldilocks economy sighting in the neighborhood weren’t entirely erroneous after all. Judging by February’s robust US equity and HY market performance, which came on the back of a lower than expected initial Q4 GDP report and economic data that seemed to ease concerns about an imminent change in Fed rate policy, market participants adopted a more confident view of risk during the month. This was evident in the strong decline in benchmark rates and Investment-Grade debt – the same paper that has benefitted so much from low Fed and global interest rate policies over the past several years – and reallocation of capital into HY (speculative) debt and equities. The moves resulted in gains in the Dow, S&P 500 and NASDAQ indices of 5.6%, 5.5% and 7.1% for month, respectively, increases in 2, 10 and 30-year Treasury rates of 18bps/40%, 35bps/21% and 36bps/16%, respectively, and an increase in the HY Master Index that pushed its yield down 67bps to close the month at 5.87%.
Read the full pdf here: CapMkts Monthly_February ’15