Portfolio durations differ from key rate durations, as even though the durations of two portfolios may match, both portfolios may differ in the maturity profiles of the bonds they comprise, which will result in differing key rate durations.
Although GDP grew at a little under 3.5% in the second half of 2013, up from an average rate of 2% in the past three years, inflation remains at ~1% level, well below the Fed’s long-term target of 2%.
The S&P/Case-Shiller Home Price Index (or HPI) was released on Tuesday, March 25. The 20-city composite HPI recorded a gain of 13.2% year-over-year (not seasonally adjusted).
The interest rate spread between 10-year Treasury securities (IEF) and 30-year conventional mortgages (VMBS) was at historic highs at the end of 2008 and the beginning of 2009
The interest rate spread is the difference between Treasury yields (TLH) and interest rates on mortgages (VMBS). Interest rate spreads tend to widen in times of economic uncertainty.
Bond markets across the risk spectrum—including Treasuries (TLT) and mortgage-backed security ETFs (MBB)—posted gains in the first four months of 2013.
