27 Apr 2016

Corporate Bond Risks and Returns in the News

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

By David Ott Tags: , ,
6 Apr 2016

Yield Curve Madness

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

By David Ott Tags: , ,
5 Apr 2016

Capital Markets in Perspective

We all know that the first quarter was a wild ride as the S&P 500 fell -10.29 percent through February 11th and then rocketed back over the rest of the quarter and finished in the black. When I tallied up the results for the first quarter, I have to admit that I was surprised by the range of returns within the major asset classes, from the -5.4 percent decline in… Read More

By David Ott Tags: , , ,
5 Feb 2016

Interest Rates in Perspective

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

By David Ott Tags: , ,
13 Jan 2016

Insight: David Bowie, Finance Wizard?

You may or may not be a David Bowie fan, but either way, you’ll probably be surprised by his contribution to finance. In 1997, David Bowie was a wealthy man, but didn’t have enough cash to buy out the other 50 percent co-owner of the songs that he had written. He was buddies with an investment banker who proposed a novel idea: sell bonds using his song library as collateral… Read More

By David Ott Tags:
11 Jan 2016

ALM Insights – January 2016

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: We Have Liftoff! But I Thought Rates Went Up? Is The Canary Still Singing?  

By Cliff Reynolds Tags: , ,
15 Dec 2015

Junk Bond Selloff Continues

The junk bond market was under pressure again yesterday, but managed to finish off of their worst levels.  The high yield market was roiled again after one hedge fund, Lucidus Capital, announced that it was shutting down its $900 million credit fund, and another hedge fund, Stone Lion, said that they were suspending redemption on their $400 million fund. This comes after news from last week that Third Avenue, a… Read More

By David Ott Tags: ,
11 Dec 2015

Trouble in Junk Bonds

Last September, I wrote that we avoid junk bonds because they are too sensitive to stocks, which means that a portfolio of stocks and junk bonds isn’t as diversified as a portfolio that has stocks and investment grade bonds (click here to see the original article). Over the last year, the S&P 500 has earned just 1.68 percent and suffered a 10 percent correction in the autumn.  Junk bonds, as… Read More

By David Ott Tags:
12 Nov 2015

Navigating Bond Market Holidays

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

By Cliff Reynolds Tags: ,
6 Oct 2015

Bond Traders Know Best

Last week, I wrote about how losses at the Swiss mining company Glencore were affecting the overall market.  In the article (found here), I said that bond prices in the market often reflect credit conditions before the ratings agencies like S&P and Moody’s make any changes. The Glencore situation may be a good example because bond prices have changed markedly in recent weeks as investors worry about their credit worthiness. … Read More

By David Ott Tags: