U.S. bonds yields rallied hard today (yields and price move inversely) on falling oil prices and concerns over high-yield debt especially within the energy sector. Overall, the stock market had a tough week with both the Dow Jones Industrial average and S&P 500 closing down over 3% for the week.
Surprisingly, bonds rallied into inflationary news that was reported this morning. Wholesale inflation was higher and rose at the fastest pace since June. Even the almost certainty of a December rate hike by the Federal Reserves did not deter bonds. U.S. 10-year Treasury yield closed the week at 2.148%
A quick thought on oil: Oil closed at $35.36/barrel this week. Most of us never thought we would see oil under $60 per barrel in our lifetimes; the current price is remarkable. While putting an average of $350 in each consumers’ pocket this year, the low price of oil is troubling because oil is used in so many of our businesses from manufacturing to product development to transportation. The key question to ask is: What is $35 oil telling us? Obviously, the market is concerned.
With so much negativity in the air, we are biased toward floating interest rates at this time.