NEW YORK (TheStreet) -- TheStreet's Jim Cramer and Debra Borchardt discussed the recent onslaught in fixed income and where investors might go from here.
Borchardt noted that the yield in the 10-year Treasury notes ripped from 1.6% to 2.6% in just six weeks, causing over $7 billion to flood out of bond funds over the past month. Now that the fixed income market has stabilized a bit, stocks have finally been able to have a small relief rally.
She also said the situation began to get really scary when investors couldn't liquidate their positions in some of the bond ETFs, which could have caused a catastrophic selloff if that continued.
While the press likes to target banks, and have recently put them under fire for potentially being crushed in their bond portfolios, Cramer is not buying it.
He said banks don't have as much exposure to bonds as they once did and that the rise in the yield curve will boost net interest margins substantially, which is much more important.
He also cited
Joe Deaux's recent work regarding the matter.
So what does the Average Joe do, after trying to be conservative and investing in bonds proved nearly fatal? Cramer's advice is to stay in cash for now and wait for rates to go higher.
He said that investors were reaching for yield and lost on their principal, concluding that's not what's supposed to happen.
-- Written by Bret Kenwell in Petoskey, Mich.
Bret Kenwell currently writes, blogs and also contributes to Rocco Pendola's Weekly Options Newsletter. Focuses on short- to intermediate-term trading opportunities that can be exposed via options. He prefers to use debit trades on momentum setups and credit trades on support/resistance setups. He also focuses on building long-term wealth by searching for consistent, quality dividend paying companies and long-term growth companies. He considers himself the surfer, not the wave, in relation to the market and himself. He has no allegiance to either the bull side or the bear side.