Although it’s come and gone, I am still thinking about the price spike in the 10-year US Treasury note that occurred last Wednesday. Someone from Blackrock told me yesterday that it was the most volatile day for the 10-year since 1980, which implies that it was more volatile than 99.91 percent of all of those trading sessions. You can see from the chart that all of wilding was in the… Read More
One of the interesting implications of the recent selloff in stocks and rally in bonds is that investors have quickly shifted gears regarding when they think that the Federal Reserve will begin to raise interest rates. Right now, the market expects the Fed to announce that they will end their bond-buying program, known as quantitative easing, at their meeting on October 29th. There has been some scuttlebutt that the Fed… Read More
Although there are still a good solid two and half months left this year, the big stories in my mind are set: the horrible performance of US small cap stocks (overseas small stocks are mildly worse than overseas large) and the meaningful drop in US Treasury bond yields. Back in May, I wrote that the Treasury bond market was a bit of a mystery because yields were falling, which is… Read More
Last week, I wrote that REITs and TIPs are relatively pedestrian ‘alternatives’ because they are so commonly used. TIPS, which stands for Treasury Inflation Protected Security, are issued by the government – how could they be alternative? What could be more mainstream than a bond issued by the government? Back in August, I did a write up on REITs and they really are different from traditional stocks and bonds, and… Read More
When I first saw the headline on CNBC that Bill Gross was leaving PIMCO, I didn’t pay close attention because I assumed it was one of those headlines that didn’t have any facts but asks a provocative question, like ‘Is Bill Gross Leaving PIMCO?’ It’s almost an absurd question, but that’s exactly what happened on Friday after a series of bad public stumbles, some of which I’ve chronicled already (click… Read More
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
