Column by Gabelli Funds

The Federal Reserve Is in the Asset Purchase Taper Spotlight Once Again, What Should We Expect?

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  1. The Fed is in the asset purchase (QE) taper spotlight once again as rising nominal and real longer term UST rates reflect expectations that inflation may rise as the economic recovery strengthens due to unprecedented fiscal and monetary stimulus, rising consumer spending from virus relief checks, rising cumulative COVID-19 vaccinations given, and surging government debt to pay the bill. 
  2. Dealmaking remained robust in February with $390 billion in new deals announced, bringing global volume to $680 billion year to date, an increase of nearly 20% over 2020 levels.
  3. In the convertibles space, February issuance continued at a rapid pace, however new issue pricing became a bit stretched with a number of companies able to price zero coupon bonds at high premiums. US Treasury yields have been moving higher, and traditionally this has been a good time for convertibles.