30 May 2017

Bond Market Views on Growth and Inflation Today

Almost a year ago, the yield on the 10-year US Treasury hit an all-time low, falling to 1.36 percent, just below the previous all-time low of 1.39 percent, set in 2012. After the yield on the 10-year bottomed last summer, the yield drifted slowly higher until the election when, boom, it shot dramatically higher overnight.  Investors were optimistic that the Trump administration might bring faster economic growth through a combination of… Read More

17 Apr 2017

The Fed’s Next Move

During the 2008 financial crisis, the Federal Reserved used a variety of tactics to stabilize the economy and financial system.  First they cut interest rates, but when they got to zero and couldn’t cut anymore, they started buying bonds in the open market in a process call quantitative easing (QE). The program was controversial because a lot of people thought that it would stoke inflation.  While that didn’t come to… Read More

2 Mar 2017

What About The Bonds?

Almost all of the focus on the Federal Reserve lately has been concentrated on the future path for the fed funds target rate. After the false start in December of 2015, the FOMC hiked rates again in December of last year and now stands poised to actually turn things into a steady campaign of rate hikes. However, the other piece of their emergency level of monetary policy accommodation – the… Read More

17 Jan 2017

I am a Capitalist

Last week, I had a very enjoyable meeting with a valued client and long-time reader.  In the meeting, he said that I should publish some of my old Daily Insights now and again, something I plan to do from time to time when I don’t have an idea (like now) on periodic Throwback Thursdays.   The commentary below dates back to August, 2011, when stocks lost more than 15 percent… Read More

19 Dec 2016

Bond Market Fascinations: An Interview

Since the election, interest rates have risen across the curve.  The Federal Reserve raised short term interest rates last week for the first time this year, but perhaps more importantly, longer term rates have also risen, which means falling bond prices. Right now, the Barclays Aggregate Bond index is still positive for the year, but the gains are muted, especially compared to the 5.8 percent gain that they enjoyed just… Read More

30 Nov 2016

Inflation On The Horizon

Interest rates are higher and once again it has a lot of investors paying attention to the interest rate risk in their portfolio. Since the Ten-year yield dropped to 2% at the depth of the financial crisis we have had multiple periods of volatility in the bond market when rates rose only to fall back down or in some cases go even lower. Each time the reason was a little… Read More

21 Nov 2016

Bond Rally and Rout to Nowhere

It’s not a stretch to say that 2016 has been full of surprises! One of the big surprises from our perspective up until the election was the decline in interest rates and corresponding strong return that bonds delivered. I wrote about the surprising decline in yields as early as February and was going a little bananas as yields throughout the world went negative (here, here and here).  We never went… Read More

30 Sep 2016

Liquidity When You Need It

This month’s ALM Insights is a return to one of my favorite topics, bond market liquidity. In the September 2013 issue I wrote Liquidity as a Risk Factor – which highlighted the impact that liquidity can have on expected return. I wrote on liquidity again in the June 2015 issue in Is Bond Market Liquidity Gone? – where I looked into how market liquidity can change over time. Well the… Read More

6 Sep 2016

Lower For Longer: The View from Tokyo

Several years ago, I was convinced that bond yields were likely to move higher simply because they were at historic lows.  As time went on and bond yields fell to even more historic lows, I changed my tune. People asked me how much lower they could go and while I didn’t really know the answer, I would simply quote the yields in Germany and Japan, which were lower. Then, I… Read More

6 Jul 2016

Negative Swiss Yields Get Even Crazier

One of the more striking headlines yesterday was that Swiss government bonds now have negative yields out 50 years – that’s right, 50 years! That’s a little hard to fathom, partly because we don’t have bonds that extend that far, but also because 50 years is such a long time.  I mean, if I bought a 50 year bond, I’d be in my 90s before I got my money back. Forget inflation, I’m just talking… Read More