1 min readAbstract With the Fed on hold for an extended period, institutional cash investors need a new perspective on dealing with the prolonged low yield reality. Our four-step guide reminds investors to expect lower yields in the new environment, increase exposure only to securities supported by strong fundamentals, improve yield potential with moderate maturity extension, and…
3 min readAs signs of stability returned to capital markets in recent weeks, we’ve begun to hear investors inquire as to how to improve yield in their cash portfolios. We acknowledge that, first and foremost, the return of risk appetite is a welcome and healthy sign after a period of frozen credits and a crisis of confidence….
2 min readExecutive Summary Investment Considerations: Government Sponsored Enterprises Government Money Market Funds FDIC TLGP Guaranteed Debt Foreign Government Guaranteed Debt Beware Certain “Industrial” Credits Institutional cash investors found themselves in a pickle when the market’s desire for safety made treasury securities and treasury money market funds inaccessible. However, when the default option is no longer an…
3 min readExecutive Summary From administering aggressive interest rate cuts to providing longer-term liquidity to financial firms; from accepting non-traditional asset collateral to assisting the Bear Stearns takeover by JPMorgan Chase; this Federal Reserve is unlike any we have seen in recent history. By throwing out the rulebook of central banking, some pundits say the Fed sets…
2 min readExecutive Summary With 400 basis points of Fed Funds rate increases over the past 24 months, investors are rightfully anxious about the impact of the Fed tightening policy. Our study finds that historically falling core CPI data tends to encourage the Fed to stop raising rates. Other key indicators, however, do not seem to have…
2 min readExecutive Summary Compared to past periods, the yield curve inversion we are experiencing is quite benign. Therefore, there need not be profound concerns that an economic recession will automatically derive from this phenomenon. After the Fed funds rate reaches its peak in the coming spring-summer timeframe, one can expect the shape of the yield curve…
2 min readThere are several portfolio management techniques available to help diminish the risk presented by higher interest rates. If fact, when managing portfolio duration, yield curve positioning and security selection properly, rising interest rates can add value, particularly for short duration or held-to-maturity portfolios. Duration Management Though it is extremely difficult to predict with precision how…
1 min readWhat are Treasury Inflation-Protected Securities? Treasury Inflation Protected Securities (TIPS), are inflation-indexed government bonds whose principal amount is adjusted periodically for inflation. A fixed interest rate is paid semi-annually on the adjusted amount. They may also be referred as Treasury Inflation-indexed Securities (TIIS). Overview of the TIPS Market Established in 1997 by the US Treasury,…
2 min readExecutive Summary A portfolio of laddered maturities may have better yield advantage over money market funds in a rising rate environment. Market Cycle Comparison Since 1993, the average net-of-fees yield advantage of 1-year A-rated corporate bonds over the Lipper institutional Money Market Average was 86 basis points annually. In the rising rate environment of 1994,…