DB9: US Treasury yield hits 1-year high as global bond sell-off continues FT 02 25 21

The different articles attached to this discussion deal with bonds, not only in the US, but also in other important economies in the world such as Australia and some European countries such as Germany and England. the article entitled '' U.S. Treasury Yields Rise After Positive Jobs Data '' mentions that borrowing costs on everything from mortgages to corporate loans has jumped to near 1.5% in a short time, all this due to expectations that vaccines and government stimulus will accelerate growth and inflation. Moreover, another article deals with junk bonds. This article describes that the average yield on U.S. junk bonds dropped below 4%. This article also states that January was a record month for junk-bond sales. The article "Everybody Wants Muni Paper" describes that some municipal bonds are tax exempt, which makes them attractive to investors. This same article explains that municipal tax revenue fell 1% in 2020. In addition, pension bonds are also mentioned in this article, and also, it details that Illinois and California have issued the largest amount of pension bonds. Pension bonds are not tax exempt, but yields are attractive to investors. Furthermore, an important highlight described in the article ''Reddit-Fueled Stock Rallies Boost Some Bond Prices'' is that AMC’s $1.5 billion notes due June 2026 have jumped more than 30 cents to 74 cents on the dollar, for a 20.039% yield. Moreover, the article '' US corporate bonds grow more susceptible to sudden rise in rates '' mentions that ''the average duration for investment grade corporate bonds now stands at 8.3 years, according to data from ICE Data Services, up from 7.7 years at the start of 2020 and just 6.5 years a decade ago.''

1. What Is a Bond? What Type of Bonds are there? 5) Issuers of Bonds

A bond is a long-term contract under which a borrower agrees to make payments of interest and principal on specific dates to the holders of the bond. In these articles, the types of bonds mentioned are: *Treasury Bonds, which are bonds issued by the federal government, sometimes referred to as government bonds; *Municipal Bonds, which are bonds issued by state and local governments. *Foreign Bonds, which are bonds issued by foreign governments or by foreign corporations. In these articles is also mentioned pension bonds. *High-yield bonds, also known as junk bonds are bonds that are rated below investment grade by the credit rating agencies. As these bonds are riskier than investment grade bonds, investors expect to earn a higher yield.

1. Credit Ratings

A bond rating is a way to measure the creditworthiness of a bond, which corresponds to the cost of borrowing for an issuer. These ratings typically assign a letter grade to bonds that indicates their credit quality. Private independent rating services such as Standard & Poor's, Moody’s Investors Service, and Fitch Ratings Inc. evaluate a bond issuer's financial strength, or its ability to pay a bond's principal and interest, in a timely fashion.

1. Pricing Bonds

Bonds are priced at par value, but sometimes, they can be traded at premium, or at discount. The amount of interest paid on a bond is fixed. However, the yield, which is the interest payment relative to current bond price, fluctuates as the bond's price changes.

1. Bonds and Taxes

Some of these articles mention that some bonds are taxed, and others are not. For example, some municipal bonds are tax exempt, which makes them attractive to investors. On the other hand, pension bonds are not tax exempt, but their yields are attractive to investors. Additionally, interest on corporate bonds is taxable, but treasury bonds may be exempt from state taxes.

1. How to Buy Bonds

When a person wants to buy bonds, there are several options to choose from. Individuals can purchase bonds with a broker, investment bank, through an exchange-traded fund, or directly from the U.S. government or state that issue them.

1. SEC regulations

The Securities and Exchange Commission (SEC) is the federal agency that regulates securities markets in the United States. The SEC was mentioned in the article ''SEC Sues Morningstar Alleging Undisclosed Changes to Bond Ratings.'' This article describes that the SEC alleged in a civil lawsuit that Morningstar Inc., which is a credit-rating agency, allowed credit-rating analysts to adjust financial models that resulted in better terms for bond issuers and in some cases less interest income for investors. Finally, another important information provided in the article  ''SEC Order Finds Morning Star mixed analytical decisions with Sales and Marketing '' is that Morningstar Credit Ratings LLC will pay $3.5 million to settle charges because it violated a conflict of interest rule by mixing analytical operations with sales and marketing efforts.