Beware the Snows of January

The equity markets are getting nervous with the S&P 500 almost 6% off its high, foreign equity markets down at least that much or more and emerging market currencies slipping and sliding.  Normally in such moments there are two opinions: the correction is here versus the economy is solid so don’t worry.  Were the weather Read more […]

Treasury yields remain lower for the start of 2014

Counter to the thinking that tapering would drive yields higher; Treasury yields have remained lower for the start of 2014.  Additional collateral needs to meet regulatory requirements; risk-off trading and economic uncertainty in emerging market countries such as Turkey have temporarily kept rates lower than the start of the year.  It remains to be seen Read more […]

Puerto Rico and Indexing the Municipal Bond Market

Puerto Rico Bonds Removed from Investable Municipal Bond Indices On January 8, 2014, S&P Dow Jones Indices announced that it is removing bonds issued by Puerto Rico and other territories from the S&P National AMT-Free Municipal Bond Index effective  January 31, 2014. Why? Puerto Rico bonds no longer meet the objective of the index. The Read more […]

COMMODITY ZODIAC: Prosperous Horse

Happy Chinese New Year for all celebrating!  As a special tribute, this post will focus on the fact that all 5 commodities that start with the letter “c” (the same letter China starts with) in the S&P GSCI Agriculture and Livestock have had positive returns in 2014.  I picked the agriculture and livestock to symbolize the importance Read more […]

Housing Finance: Déjà vu All Over Again

Bonds May Puzzle But Stocks Could be Worrisome Bonds: Just when people thought we were safe from creative financing applied to bonds backed by homes, a new improved approach is about to surface.  The past year has seen an increase in buying homes for rent by private equity funds and others.  The private equity buyers Read more […]

The Shrinking US Federal Budget Deficit

The US federal budget has a reasonable probability (our base case scenario) of reaching operational balance – revenues equal expenses excluding interest expense – by FY2015. This is an amazing turnaround and it means that budget deficit is now shrinking faster, meaning reduced supply of US Treasuries, even as the Federal Reserve tapers its quantitative Read more […]

Where VIX Comes From

At work, I am sometimes asked this simple but challenging question: “Where does VIX come from?”  There is a reason I am asked this – I am our company’s product manager for volatility indices.  But I admit that I have struggled to come up with an approachable way to explain the methodology of the CBOE Read more […]

Dispersion and Correlation: Which is “Better?”

We recently introduced the concept of dispersion, which measures the average difference between the return of an index and the return of each of the index’s components.  In times of high dispersion, the gap between the best performers and the worst performers is relatively wide; when dispersion is low, the performance gap narrows.  Today’s dispersion Read more […]