By Karen Pierog

CHICAGO (Reuters – Investors tried to lower risk in U.S. corporate bond markets on Monday. The fund monitoring the high-yield sectors fell to their lowest levels since March, after Jerome Powell’s election for a second term. There were also expectations that rate rises would be sooner.

The iShares iBoxx exchange traded fund dropped by 0.38%, to an $86.22 low after eight months.

Kathy Jones, Chief Fixed Income Strategist at Schwab Center for Financial Research, New York said that there had been some shift out of risk assets, as U.S. Treasury yields rose along with the 2-year yield. This is usually in line with expectations and has topped 0.59%, the highest point since March 2020.

Jones explained that Jones believes that “if the market predicts the Fed tightening a few times next year”, then financial conditions will become more tight and lower quality companies in the high yield market will have to deal with tougher times.

She said that risk reduction is a common result of a tightening or rate-hike cycle.

With 2021 coming to an end, it is possible that investors could also cash in their gains.

Kenneth Monaghan is co-director for high yield at Amundi Asset Management US. He said that “people are looking to shut down in this very exhausting year” after seeing the sector’s records issuance and overall good performance.

“If I were to guess the future, it would be sideways or perhaps weaker conversation between now-the end of the calendar year,” he stated.

Powell was nominated by President Joe Biden for another four-year term. This allows the ex-investment banker to carry on the biggest overhaul of monetary policy in the 70s and complete the economic recovery from the crisis.

High-yield spreads increased on Friday. On Friday, the spread for high-yield bonds widened after falling to 303 base points on Nov. 8 (NYSE:ICE). The BofA U.S. High Yield Index option-adjusted spread was 324 basispoints on Friday. This is its highest level since Oct. 13.