|For a few weeks now, I have mentioned the January fixed income rally that we have seen the past three years. If you count this year, that would be four years in a row. You can see from the chart on the right how strong this pattern has been. We have averaged a surprisingly consistent 40bp drop in yield the previous three Januarys. For comparison purposes, I adjusted the previous years’ rates on Jan 1 (and subsequent rates) to this year’s Jan 1 rate (2.45%).
I generally don’t have a strong view on seasonal patterns. One would think that with efficient markets, there should be an adjustment (eventually). What makes the January fixed income rallies a little suspicious is that in some of those years, the data was not particularly bullish. CLICK TO READ THE REST OF THIS ARTICLE FROM THE CA WEB SITE
Next Week: I discuss the recent widening of the ED-FF spread.