Shorter Duration Munis Hold Up While Longer Duration Munis Tumble

Duration is everything in a rising interest rate market. Short term municipal bonds have fared better than their longer term counterparts as money moves out of bond funds. The S&P Short Term AMT-Free Municipal Bond Index has seen its weighted average yield remain fairly steady and has recorded a modestly down June so far of Read more […]

Senior Loans & High Yield Bonds

Duration is everything in a rising interest rate environment.  Senior loans, as tracked by the S&P/LSTA U.S. Leveraged Loan 100 Index are down 0.34% month to date. These floating rate below investment grade loans have seen their weighted average yield rise by 19bps since May month end.  Meanwhile, fixed rate high yield bonds tracked in Read more […]

Looking Back When Interest Rates Rose

With all the discussion about what might happen were interest rates to rise, it is worth looking at what has happened before. In 1994 the Fed tightened policy and interest rates rose faster and higher than investors expected.  The chart shows the yield on ten year treasury notes — the same instrument everyone is talking Read more […]

High Yield Bonds See Yields Continue to Rise

High yield corporate bonds as tracked by the S&P U.S. Issued High Yield Corporate Bond Index have seen yields rise about 56bps since month end May driving a negative total return of 1.38% so far for June 2013. High yield municipal bond yields have risen by 30bps in the same time period as the S&P Read more […]

Stocks and Fed Fears

Only a month ago the market was in love with the Fed and Ben Bernanke was a hero for helping the market move from 1350 in November to about 1670 in May.  Now the central bank is a villain as the yield on 10 year treasuries tops 2%. Interest rates have risen in the last Read more […]

A safer bet?

http://www.pensionsage.com/pa/a-safer-bet.php Read the article in PensionsAge by Peter Carvill, looking at the shifting commodities landscape. In recent decades, investment by pension funds into commodities has been seen as something approaching what may be described as a way to counter-balance the risks from traditional stocks and bonds. As The Role of Commodities in an Institutional Portfolio states: Read more […]

Low Volatility: Success or Failure?

One of the consequences of May’s shift in leadership of the U.S. equity market from defensive to cyclical sectors has been the underperformance of most (if not all) low volatility strategies. Does this mean, as some commentators have suggested (e.g. see http://www.indexuniverse.com/hot-topics/18860-when-low-volatilitty-bites-back.html?showall=&fullart=1&start=4), that low volatility strategies “failed?” Making a judgment of success or failure, about Read more […]

The Other Shoe?

One of the striking things about May’s U.S. equity performance was that although the market continued the strength it had shown between January through April, it was strong in a different way. http://us.spindices.com/documents/commentary/dashboard-us-20130531.pdf For example, the best-performing sector in the first four months of the year was Utilities (up 19.74%); in May the Utilities sector Read more […]

Thinking About P/E Ratios

The chart below is  a scatter diagram comparing the P/E ratio to the price return on the S&P 500 over the next ten years.  P/E is defined as each month’s level of the S&P 500 divided by the earnings per share on the 500 over the trailing 12 months. Both the P/E and the index Read more […]

S&P Dow Jones Fixed-Income Commentary: Mixed Signals as Rates Rise

Chairman Ben Bernanke has tried to be cautious in scripting a message to the markets, but recent communications out of the Federal Reserve have been mixed.  With seven members of the Board representing 12 districts and past members all speaking to the press, the message can get convoluted at times.  The planning and timing to Read more […]