2 min readFOMC Holds Rates Steady The Federal Reserve met last week to review monetary policy for the first time this year and to no one’s surprise, the FOMC left the overnight lending rate unchanged at the 1.50% to 1.75% range. The Fed remains in a wait-and-see mode where interest rates are concerned, saying it “judges that…
14 min readDOWNLOAD FULL REPORT Abstract We identify three themes to watch for cash investors each year. For 2020, we comment on the Fed’s neutral stance, the continued non-solution for repo market liquidity, and the popularity of ESG (environmental, social and governance) investing. Introduction At the start of each year, we typically name three broad themes that…
2 min readStrong Year for the Markets After trending down on Tuesday morning, markets reversed course and closed the year on a high note. While they were off their December all-time highs, the S&P 500 and Nasdaq posted their best yearly performances since 2013, rising 28.9% and 35.2%, respectively, while the DJIA had its best year since…
2 min readFinal FOMC Meeting of 2019 The Federal Reserve met on December 11th and, as expected, left rates unchanged at the 1.50% to 1.75% target range. The FOMC signaled that it has little appetite for adjustments to monetary policy in the near term, saying “the current stance … is appropriate to support sustained expansion of economic…
2 min readAfter three interest rate cuts since July, the Fed signaled last month that it finally expects to take a breather, with no more moves for a while. But that only means we have to start wondering what may come next. Will the recent spate of positive economic news prompt the Fed to reverse course and…
12 min readDOWNLOAD FULL REPORT Abstract The pause by the Fed after three rate cuts removes some near-term uncertainty for short-term interest rates. On balance, we think the economy faces more headwinds than tailwinds, and thus the probability of further cuts is significant enough to warrant some portfolio readjustment. A yield curve that is no longer inverted…
2 min readIn a move that was widely expected, the Federal Reserve cut rates last Wednesday by 25 basis points to the 1.50% to 1.75% range. Seven officials voted for the cut, and two (Esther George and Eric Rosengren) dissented again in favor of no change in monetary policy. Because the rate reduction had been anticipated, the…
19 min readDOWNLOAD FULL REPORT Abstract Rather than dismissing September’s repo turbulence as stemming from idiosyncratic events easily rectified by the Fed, we think that the event reveals broader vulnerabilities within the hidden plumbing of our financial system. Although not all institutional cash portfolios directly use repo, this squeeze should concern us all. We don’t think there…
5 min readThe interest rate blues are well in effect. For those with enough foresight to see this coming (and thus to load up on long-duration Treasury bonds) it has been an absolute riot. For the rest of the fixed income investment community, it’s been a bit of a bloodbath. Figure 1: Yield Curve Source: Bloomberg Over…
5 min readThis past week saw some nearly unprecedented chaos in repo markets. Beginning late Monday and extending into Tuesday morning, funding in overnight cash markets essentially dried up, sending investors scrambling for liquidity. This resulted in a surge in repo rates for those who did transact, with overnight rates jumping from the low-to-mid 2% range to…