It’s an interesting question. The ability to call the tops and bottoms with perfect accuracy is considered the “holy grail” of bond market investing. We spend a great deal of effort talking to clients about the risk of trying to make speculative calls – the risk of being wrong of course. Just as an exercise I thought it would be neat to imagine what it would be like if we… Read More
With a lot of focus being put on the coming end to the Federal Reserve’s quantitative easing campaign, this article will delve into some of the other factors impacting interest rates in the US. The Federal Open Market Committee (FOMC) has maintained a steady course ever since Chairman Bernanke first hinted at the end of quantitative easing in the spring of 2013. The “Taper” which is scheduled to complete this… Read More
ALM Insights is focused on banks and other institutions that use their portfolio to manage risk on both sides of their balance sheet. It takes an in-depth look at securities investment strategies, balance sheet and asset/liability strategies, regulatory topics and general economic information. To view this issue, click the image below. In This Issue: What if You Called The Market Perfectly? The Impact of Fed Tightening Why Aren’t Interest Rates Higher?
The Wall Street Journal had a headline yesterday that I couldn’t resist: Junk Bonds Deserve a Place in Investors’ Portfolio. I like to read articles where I agree with the fundamental proposition, but I REALLY like to read articles where the premise completely contradicts my view, or the view of Acropolis. This article falls in the second category since we believe that junk bonds don’t deserve a place in your… Read More
The story of Argentina’s recent debt default begins in the Great Depression. Not our Great Depression – their Great Depression, which started in 1998 and ended in 2002. Leading up to the crisis, the Argentinian government massively over-borrowed and was forced to default on their bonds when the country fell into financial crisis – the economy shrank by 20 percent, unemployment rose to 25 percent, bank deposits were seized, the… Read More
Over the years, we’ve seen and created a ‘periodic table’ of returns that stacks asset classes in order of their performance on a year by year basis. By color coding each asset class, most investors look at the table and realized that asset classes jump around a lot and it’s difficult, if not impossible, to make good timing decisions. I thought it would be interesting to the same thing with… Read More
With the Federal Reserve now unwinding their bond purchasing program known as quantitative easing, it’s likely that the Fed will start to raise short-term interest rates at the end of 2015 or the beginning of 2016 (assuming no new information). Now that we ‘know’ that the Fed will raise rates, what will happen when interest rates rise? The short answer is that it depends. I know that’s an unsatisfying answer,… Read More
ALM Insights is focused on banks and other institutions that use their portfolio to manage risk on both sides of their balance sheet. It takes an in-depth look at securities investment strategies, balance sheet and asset/liability strategies, regulatory topics and general economic information. To view this issue, click the image below. In This Issue: Remember The Taper Tantrum? What’s My Duration? Bond Sector Performance
Interest rates are low and many investors are worried about rising rates, which can hurt bond prices. As always, Wall Street has rushed to the aid of investors by creating products to meet this need, just as they did with internet funds in the late 1990s and real estate funds during the bubble. One of the ‘solutions’ that Wall Street has created to meet investor demand is something called a… Read More
Yesterday, someone asked me what’s going on in the markets. I said that stocks are flopping around zero – plus two percent or minus two percent depending on what you look at, nothing really. I said that the interesting story, in my opinion, was that the yield on bonds has been dropping all year, much to everyone’s surprise. When I hung up the phone, I looked up the yield and… Read More
