Baird Advisors Fixed Income Market Commentary - September 2009

Treasury yields edged 2-13 bps lower in September and fell by as much as 28 bps in the 3rd quarter. While yields are still higher on a year-to-date basis, the decline in yields during the 3rd quarter reflects 1) the impact of strategically timed Government purchases of Treasury, Government Agency and Agency mortgage pass-through securities, but also 2) a discernable shift from market concern that unprecedented Government stimulus will almost certainly lead to future inflation to renewed concern that deflation may still be the greater risk to the economy and the financial markets in the months and years to come.

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