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
Yesterday, I was in the middle of updating a chart about the basic risk and return characteristics of corporate bonds when Standard and Poor’s announced they were downgrading bonds issued by Exxon-Mobile from AAA to AA+. It’s a shame to see another company lose their prime rating – there are now only two companies that have an AAA-rating. Exxon had held the prime rating since 1930, if you include predecessor entities,… Read More
Bond yields continued their downward march and fell to a five-week low yesterday as the yield on the 10-year US Treasury hit 1.73 percent. After starting the year at 2.24 percent, the benchmark yield dropped to 1.63 percent when the stock market bottomed out on February 11th and then climbed to 1.98 percent before falling again. As low as your yields are today, they are among the highest in the… Read More
So far, 2016 has been full of surprises, but most of the attention has gone to wildly volatile oil and stock prices. Less noticed, but equally important, has been the boost on bond prices, as seen by the dramatic fall in bond yields. The 10-year US Treasury note, the bellwether benchmark, started out the year yielding 2.27 percent, 10 basis points (a basis point is one hundredth of one percent)… Read More
Yesterday was Veterans Day. A Federal holiday in the US where we honor those who have served in our country’s military during wartime and peacetime. But it also makes for something a bit strange in the financial markets. If Veterans Day falls on a weekday, the stock market is open while the bond market is closed. Because we are sensitive to transaction costs and realizing capital gains in our client’s… Read More
One way to judge the performance of a mutual fund or ETF is to compare the results to a relevant benchmark, which is usually an index that has relatively similar characteristics. Another method is to compare your fund to a group of funds that are basically pursuing the same strategy. Admittedly, we don’t use this approach very often, even though I think it would make our job a lot easier… Read More
It should not come as a surprise to anyone that markets have performed very well over the past five years. The S&P 500 has earned 16.12 percent per year in the five years that ended in February. Few investors realize that corporate bonds have also done very well over the past five years. For the five years that ended in February, the Barclays US Corporate Bond index has earned 6.22… Read More
One of my most vivid memories from the 2008 financial crisis was when the yield on the US three-month Treasury bill turned negative. Investors were so scared about what might happen that they were willing to pay so much for short-term bills that they would accept negative yields. Investors knew with certainty that they would get back less than their investment. I printed the screen because I thought it was… Read More
Yesterday, I wrote that the yield on the 30-year US Treasury closed at an all time low at 2.25 percent. I also wrote that the yield on the 10-year was 2.66 percent, which was completely wrong: it closed at 1.66 percent on Friday, I simply made a fat fingered mistake – sorry. This mistake notwithstanding, I was struck by the two yields because the all-time record-low yield on the 10-year… Read More
In the December 2012 issue of ALM Insights, I wrote an article titled Basel III’s AFS Provision. At the time of the article, the provision detailing the effects of Accumulated Other Comprehensive Income (AOCI) on regulatory capital had been delayed due to a “wide range of views”, and the final outcome was still very much up in the air. Few in the banking industry thought that forcing banks of all… Read More
