whitepaper icon
,

Four Steps to Prudently Pursue Yield

1 min read

Abstract

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 be mindful of the downside risk of over-extending oneself.

Introduction

The Federal Reserve’s August 10th decision to reinvest proceeds from its mortgage-backed securities holdings sent an important signal that the near zero (0.00% to 0.25%) interest rate policy will likely linger longer than previously expected. With the futures market predicting the Fed funds rate stuck on zero through much of 201 , institutional cash investors need a new perspective on how to deal with this prolonged low yield reality.
Given these assumptions, it is possible that the moderate yield increases in money market funds and other cash portfolios in recent months will reverse course in coming weeks. Should one be content with the meager yield, if any, from these commingled vehicles? What are some of the feasible yield opportunities? Should one consider increasing portfolio risk when a double-dip recession may cause new credit concerns? We hope our four-step guide provides a helpful perspective to the institutional cash and short-duration community.
DOWNLOAD FULL REPORT

Our research is for personal, non-commercial use only. You may not copy, distribute or modify content contained on this Website without prior written authorization from Capital Advisors Group. By viewing this Website and/or downloading its content, you agree to the Terms of Use.

Please click here for disclosure information: Our research is for personal, non-commercial use only. You may not copy, distribute or modify content contained on this Website without prior written authorization from Capital Advisors Group. By viewing this Website and/or downloading its content, you agree to the Terms of Use & Privacy Policy.

Lance Pan joined Capital Advisors Group in 2003. As Director of Investment Research and Strategy, Lance assesses the risk and relative value of asset classes and credits, creates advanced credit approval and surveillance procedures, issues credit opinions, and provides investment strategy recommendations. Lance oversees Capital Advisors Group’s Credit Committee.

Similar Posts

  • October FOMC Update

    Market Updates

    4 min read4 min readFed Holds, Markets  Expect Hike in December  As expected, the Federal Reserve left the federal funds target range unchanged at 3.75%–4.00%.  The Committee upgraded its assessment of economic activity from “solid” to “strong,” while reiterating that “domestic spending has been resilient.” At the same time, it acknowledged that “inflation remains elevated,” underscoring the…

  • One Network. Billions in Exposure.

    Credit & Risk

    10 min read10 min readWhat the Walter Investigation Reveals About Private Credit and Insurance Risk. Key Takeaways The Walter Investigation: Delaware Life’s Affiliated Investments An insurer can own hundreds of investments and still depend on a small circle of borrowers. That is what makes the investigation into Mark Walter’s insurers relevant beyond his businesses, raising questions about…

  • October Mid-Month Market Update

    Market Updates

    5 min read5 min readSeptember CPI: Price Pressures Persist The September CPI report, released October 14th, showed higher prices across most major categories. Headline CPI rose 0.6%, in line with expectations, driven largely by higher energy prices. Core CPI increased 0.3%, matching August’s reading but exceeding expectations of 0.2%. On an unrounded basis, core CPI rose 0.335%,…

  • September Employment Report

    Market Updates

    2 min read2 min readA Slowing, but Stable Labor Market The September employment report showed slower-than-expected job growth, with nonfarm payrolls increasing by just 29,000 versus expectations of 90,000. In addition, the prior two months were revised down by a combined 60,000 jobs, including a notable revision to July, which was revised from a gain of 21,000…