2 min readWhen Jerome Powell emerged as the front-runner to succeed Janet Yellen as Federal Reserve Chair, he was quickly pegged as a moderate “continuity candidate.” A low-profile, but hard-working, member of the Federal Open Market Committee since 2011, he had supported Yellin’s course of slow-but-steady interest-rate increases as the economy gradually recovered from the great recession….
3 min readAbstract Debt limit negotiations often go down to the wire, generating headline risk and investor uneasiness. The yield on T-bills maturing around default date may be substantially higher than those maturing in neighboring months. The exponential growth in government money market funds since the 2016 regulatory reform increases contagion risk should shareholders and portfolio managers…
1 min readWho would have ever thought the debt ceiling limit would become a dinner-table topic? In the past, Congress routinely voted to approve higher limits on debt covering the spending it had already authorized, and hardly anyone noticed. But in 2011, the debt-ceiling vote became a political football, with authorization tied to contentious debates about limits…
1 min readWhen the Federal Reserve began amassing Treasuries and mortgage-backed securities to fight deflation in the wake of the 2008 financial crisis, no one knew for sure how much debt it would add to the nation’s balance sheet, or how long the unprecedented “quantitative easing” program would last. While the answers are still by no means…
4 min readAbstract Key takeaways: While details are lacking, one can generally expect balance sheet normalization to start at the end of 2017, with reinvestment gradually phased out over one year, taking 2.5 years to complete for a total reduction of $1.8 trillion in Treasury and MBS bonds. Impacts to Expect: Higher interest rates on Treasury securities…
4 min readRemember the debt ceiling fights of 2011 and 2013? They may be in the back of many investors’ minds now, but will likely be front and center again leading up to March 15, when the suspension of the federal government debt ceiling expires. Any institutional cash investor who lived through those earlier Congressional standoffs knows…
3 min readAs stocks soar to record highs, it seems as though the decline in long bond yields has been endless. Less than a year after the Federal Reserve saw economic conditions sufficient to warrant the first rate hike in almost a decade, rates on long-term U.S. Treasury bonds now lie at near-record low levels (with the…
2 min readAbstract The Johnson-Crapo bill represents another concrete step towards the resolution of the future of Fannie Mae and Freddie Mac and one that will further reduce the supply of government agency debt. This presents a serious challenge to the management of cash portfolios due to the core holdings status of agency debt. Money market fund…
2 min readAbstract The Federal Reserve introduced the new reverse repo facility to control the level and volatility of short-term interest rates, to help relieve repo collateral shortage and to better regulate the tri-party repo market. The likely impact includes the avoidance of negative yield, the addition of a high quality counterparty to the marketplace, more responsive…
2 min readAbstract We do not foresee a meaningful rise in short-term interest rates even as the Fed may begin tapering bond purchases. The fed funds rate, the key factor affecting short-term rates, likely will not start to rise prior to mid-2015. Investors should continue to look for opportunities further up the yield curve with separate account…