Observation Deck

 

Observation Deck
January 03, 2014 Posted by
There is an old saying in the trading world, "sell on the rumor and buy on the news." This quote fits perfectly with how the bond market reacted to events in 2013. The year began with hopes of a "Great Rotation," in which investors would sell bonds and invest in riskier assets such as equities, which prompted speculation that yields would increase. Despite vastly improved economic fundamentals in the U.S., bonds remained well-bid as the Fed made no indication that it would tighten in the near future. This is not to say that there wasn't any volatility in the bond market.
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Observation Deck
December 02, 2013 Posted by

One of the most relevant metrics this past year has been the unemployment rate. The driving force behind the focus on the unemployment rate has been the slow road to recovery post the financial crisis in which the U.S. lost over 8 million jobs, as well as the Federal Reserve announcement that it is targeting an unemployment rate of 6.5 percent before raising interest rates. Since that target was announced the unemployment rate has garnered a lot of attention.

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Advisories; Observation Deck
October 01, 2013 Posted by
At the September Federal Open Market Committee (FOMC) meeting, which was regarded as the most highly anticipated meeting of the year, officials jolted markets with the announcement of no tapering of bond purchases at this time. In the headline commentary of Observation Deck, "Summer of Volatility," portfolio manager Renuka Kumar discusses how recent bond market volatility has been driven by the Fed and monetary policy.
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Observation Deck
September 03, 2013 Posted by
Financial yields have rallied substantially since the credit crisis of 2008–2009. According to Barclay’s indices, the differential between intermediate industrial and financial sectors bond spreads has tightened significantly, with a mere 11 bps differential as of the end August 2013.
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Observation Deck
August 01, 2013 Posted by
Market speculation on the timing of the Fed’s tapering has caused volatility in the bond market. Global corporate new bond issuances declined materially in June 2013 compared to robust issuance levels during the first five months of 2013. Nonetheless, we generally expect corporate credit risk to remain steady through 2013, with divergence in credit trends among various sectors. While investment grade corporate credit spreads initially widened 16 bps on speculation of the Fed’s tapering bond purchases, they have recently tightened by around 20 bps to 76 bps around mid-July.
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Observation Deck
July 01, 2013 Posted by
The Fed believes the U.S. economy must be on stronger footing to consider reducing bond purchases and ending quantitative easing programs (QE). The talk of the possible end of QE led to a recent spike in bond yields. Since Chairman Ben Bernanke’s economic testimony to Congress on May 22, the U.S. Treasury curve has seen bond yields climbed as high as 60 basis points.
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Observation Deck
June 03, 2013 Posted by

In the past month, there has been quite a bit of rhetoric regarding quantitative easing and whether or not the Fed will be tapering off asset purchases anytime soon. The lack of confidence in the Fed's easing of monetary policy coupled with an improved economic landscape hints at a possible slowdown in the pace of asset purchases. These factors could mean short-term rates are at a bottom, which leads to the question: Is it time to consider increasing floating-rate bonds, or floaters?

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Observation Deck
April 30, 2013 Posted by

he Federal Reserve first began its asset purchase program in the fall of 2008 to combat the financial crisis. Almost five years later, with slow GDP growth, high unemployment, and non-present inflation, the Fed is well into its third purchase program. Some investors fear these actions will spark higher inflation. We believe this shouldn’t be a concern — at least in the short run.  

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