Tuesday, October 30, 2012

US fixed income markets on a single chart

Here is what chasing yield looks like in the current environment. The horizontal axis indicates the size of each US fixed income market (in $trillion). The vertical axis shows the yield adjusted for historical losses due to defaults (more on that later). The Agency MBS adjustment takes out the prepayment option (OAS).

The Fed is achieving its goal - investors are shifting to the left.

Source: Goldman (click to enlarge)

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