QE3 Fixed Income Aftermath

So what happens to fixed income after QE3? I thought it would be interesting to look at the max drawdowns versus the current 30-day SEC yields for a select cross-section of the fixed income ETF space for the past 52-weeks. All yields are quite compressed as is expected. Yields are so compressed that only MBB (US agency-based mortgage bonds) has a 30-day SEC yield exceeding the max drawdown. TIPs have negative yield as was true for quite a while now. It seems the contagion of return-free risk has spread to most of the fixed income ETF universe at this point.

Central Bankers at Jackson Hole

Well, the much anticipated Jackson Hole Bernanke speech has come and gone. Everyone from bloggers to the big fund managers have taken drastically different interpretations of the speech. Some argue that the speech was even more bullish than announcing a definite QE3 right then and there. Others interpret this as definitely indicating that there will be no QE3 soon and definitely not before the election. On Twitter, PIMCO's Bill Gross claims

"#Bernanke to go out with his guns blazing. #QE3 a near certainty. It will be open-ended but increasingly impotent."

Most of the I-bank analysts interpret the speech as calling for more easing and on fairly quick order.