Entries filed under 'Interest Rates'

    Fixed Income: Opportunity amid Volatility

    October 16, 2014 2:59 PM by Zane Brown

    Amid the current market turmoil, where should bond investors focus?

    Risk is off and volatility is back. Financial markets have been whipsawed this past week by fears of a slowing in global economic growth. While equities have suffered sizable losses, the Treasury market has benefited as investors seek the perceived safety of U.S. government debt. 

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    The Fed: Uncertainty Rules

    September 18, 2014 2:10 PM by Timothy Paulson

    Welcome to the post–QE world. 

    Not since September 2013 have investors been as focused on, and uncertain about, a statement from Federal Reserve policymakers as they were for the one released on September 17, 2014. As it turns out, the policy-setting arm of the Fed, the Federal Open Market Committee (FOMC), did not explicitly set a timetable as to when it would begin to raise interest rates (it retained the now-famous “considerable time” reference). Nonetheless, the market is keenly aware that a rate hike is still in the cards.

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    Fed Policy: Time for a Change?

    September 15, 2014 2:00 PM by Zane Brown

    Improving economic data, along with recent statements from Federal Reserve officials, suggest that policymakers may alter their stance on the timing of a rate hike.

    The Federal Reserve may have to change its longstanding monetary policy boilerplate based on recent economic releases, increases in both commercial and consumer lending, and statements from several members of the Fed’s policy-setting arm, the Federal Reserve Open Market Committee (FOMC). These factors combine to suggest that the Fed, at its meeting on September 16–17, may alter its language from recent policy statements stating that it “likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time” after the end of the Fed’s quantitative easing (QE) program.

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    The Fed: No Rush to Raise Rates

    July 30, 2014 4:56 PM by Zane Brown

    Continued softness in the labor market may be keeping the central bank from raising the fed funds rate sooner than mid-2015. 

    Investors focused on the July 30th meeting of the Federal Reserve’s policy-setting arm, the Federal Open Market Committee (FOMC), for confirmation that the Fed was on track to end its quantitative easing (QE) program by October 2014. They weren’t disappointed. As expected, the Fed announced an additional $10 billion reduction in monthly bond purchases (down to $25 billion per month), moving it closer to the taper-free zone so anticipated. But what market watchers didn’t receive was a clear signal that the Fed was prepared to start raising interest rates ahead of schedule (in 2015). 

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    Bonds: Geopolitical Risk Rears Its Head

    July 18, 2014 2:30 PM by Zane Brown

    Developments in Ukraine and the Middle East sparked volatility in fixed-income markets on July 17. Here’s a look at the implications for investors. 

    Geopolitical risk, which largely has been brushed aside by the fixed-income market in 2014, seized the spotlight on July 17. News of a downed Malaysian airliner in Ukraine, and military incursion by Israel into Gaza, fueled a “flight to quality” trade that pushed U.S. 10-year Treasury prices higher and yields lower. The yield on the 10-year note touched 2.44% on the session, matching the low for 2014 (all data on bond yields and spreads in this post are from Bloomberg). High-grade corporate bonds also benefited, as investors redirected assets toward higher credit-quality securities. 

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