Thursday, May 24, 2012
The NBER says we exited the recession in June of 2009. At that time the 10-year was trading around a 3.72%. The further we go into the “recovery” the lower the 10-year Treasury yield gets.
Friday, May 11, 2012
FW: Market Update 5 11 12 _ JP Morgan's "Achilles heel"
Friday, January 6, 2012
2011 Year in Review
Four Years
In the summer of 2008 there was a kid who graduated from high school somewhere in this country. His parents likely told him how lucky he was to be going to college because the job market was getting bleak. They likely told him to study hard, have a good time, and that things would be better when he graduated college in 2012.
So our man graduated high school and like the sea-of-youth that surrounded him he drove off to college where he passed the time studying diligently. Now…he may have skipped a few classes and he might have even gone to a bar or two, spoken with some girls, hunted and fished all he wanted, and occasionally had to run from the campus police…but I’m confident that he at least studied a bit. Ultimately he was in a position to side-step the economic carnage, study for four years, and then take the job market by storm when he graduated.
That kid is now 6 months away from graduating college…and his job prospects are even worse today than when he started as a freshman 3.5 years ago. In the summer of 2008 the Unemployment Rate was at 5.80% and was just starting its climb to 10.00%. If he is a business major he might even know that this is the fourth consecutive year we’ve entered with Fed Funds at zero percent.
You heard that correctly…2009, 2010, 2011, and 2012 all began with Fed Funds at zero percent. If this kid is on the honor roll he might also know that the Fed is telling us that 2013 will start that way too! That makes me feel very old all of a sudden…someday I’ll be saying things like “I remember when the Fed kept rates at zero percent for five years!” And I think I might be lucky if I’m saying it was only five years.
Today our college graduate is facing some bleak prospects…the worst of which might be having to transition from a life of keg parties and dating, to moving back in with his parents…who are likely not having keggers and could also be unwilling to finance his dating schedule. Oh the humanity!
This kid is going to grab his diploma, walk off the campus, and wade into a huge pool of unemployed Americans where he will tread water and hope to be rescued quickly. As he works to stay afloat he may strike up a conversation with some of the others in the pool…almost half of the people he talks to will tell him that they’ve been in this pool for more than 27 weeks.
Our man will now begin to wonder how long he can keep his head above water. Almost half of these people have been unemployed for more than 6-months. His mind now starts to wander toward thoughts of Grad School. If he can find the money he can be back in the comfort and safety of an academic/party setting by September.
If our man was a member of the national honor society he might even be aware of the fact that it takes roughly 150,000 jobs a month just to absorb people like him (the new entrants to the work force). Given the fact that there are 12.9 million people on the “official” unemployment rolls, and that only 9 of the past 36 months have posted more than 150,000 non-farm payroll additions he can do the math and see that it is going to take a long, long time before everyone that wants a job can get one. This economy can’t even generate the jobs needed to absorb the new entrants to the job market…much less to start digging into 13 million unemployed that are treading water in the unemployment pool.
So what is our man to do? What is the outlook right now? Is the data telling him to stay in the pool because the economy is coming back and a job should float along shortly? Or is the data telling him that the economy is bad enough that he should go back to Grad School pronto before he misses the application deadline?
Given what we know about the economy we should be in a good position to help this kid make a decision.
Let’s start off with a very brief review of 2011 (not necessarily in chronological order)
- The year started with Fed Funds at zero percent
- Unemployment started at 9.8 and ended at 8.6
- Tsunami in Japan
- Nuclear Meltdown in Japan
- 8% of total unemployed apply for McDonald’s position in April!
- Fed commits to keep rates low ‘til 2013
- Refi story keeps coming back to us
- The “Arab Spring” sweeps across the middle east
- The Fed shuffles their maturities with Operation Twist
- Fed routinely says things should pick up in second half
- US gets downgraded by Moody’s
- Moody’s confused when Treasury prices RISE after the downgrade!
- It’s good to be AA+ in a BBB world
- Goldman says it could be end of decade before rates rise
- Greece causes problems in the Eurozone
- Austerity and riots in the streets in Greece
- Second half finally got here…and brought no growth with it
- Italy, Portugal, and Spain, begin having problems too
- MF Global goes under (a US Primary dealer)
- Osama Bin Laden gets to meet SEAL Team 6
- Meredith Whitney no longer remembered as the gutsy, genius analyst that predicted that Citigroup would cut their dividend
- Year ends with Fed Funds at zero percent
You’ll notice that there wasn’t a tremendous amount of good news on that list. That fact didn’t escape the Fed either…which is why we still have Fed Funds at zero percent and the Fed searching for new and improved ways to tell us that rates will remain there for a while longer.
If you read all of the FOMC statements…and it’s an unfortunate fact that I have…the tone you get is that we are in the midst of a very modest and fragile recovery where any bit of positive data that they can conjure up is offset by a laundry list of risks that offset it. There is no glaring positive news that they can put on a pedestal and say “that right there is a very good sign for this economy”.
Instead they say things like this:
“The unemployment rate dropped to 8.6 percent in November, and private nonfarm employment continued to increase moderately during the past two months. Nevertheless, employment at state and local governments
declined further, and both long-duration unemployment and the share of workers employed part time for economic reasons remained elevated. Initial claims for
unemployment insurance moved down, on net, since early November but were still at a level consistent with only modest employment gains, and indicators of job openings and businesses’ hiring plans were little changed.”
That paragraph came from the most recent FOMC minutes and it’s typical of recent descriptions of economic activity from the Fed. You’ll notice that they have to dig to find data that is somewhat positive…and after they lay it out there they come back and hedge it until you lose any excitement you might have had.
It’s a bit like a doctor telling you he was wrong when he told you that you only had 18 months to live…and you start to get excited and then he cuts you off and says “I should have said 24 months.” The news is “less bad” but it’s certainly a long way from “good”. That’s kind of where the economy is right now.
What will 2012 bring?
As you begin to ponder what the next twelve months will bring, and you hold board meetings and make forecasts…keep in mind that the Feds job is to maximize employment and maintain price stability. Those two things will dominate much of their thinking as we move forward.
There are certainly other things they will have to deal with as the global crisis ebbs and flows. They will continue to be involved with the global issues but keep in mind that their primary focus will be jobs and inflation.
So…where are those things right now?
Everyone on the FOMC committee says the same thing with regard to jobs…because it’s obvious…the unemployment rate is too high and it is falling at a rate that is unacceptably slow. Too many people are out of work and they have been that way for far too long and will likely stay this way for a long time to come. Boom…on to the next part of the dual mandate.
With regard to inflation, the Fed isn’t worried. They continue to state that long run inflation expectations are stable and that they are below their long term target levels. We are free to agree or dis-agree with their opinion on this matter…but the fact is that they are the ones who set the target Fed Funds rate and that’s the way they see the inflation picture. If we want to have the slightest hope of figuring out what they are going to do with rates then we need to know what page they are on.
The outlook for low and stable inflation coupled with the high rate of unemployment give the Fed a green light to stay on hold. In fact, at the last FOMC meeting the lone dissenter wanted MORE accommodation as opposed to less. When you take this a step further and consider that there will be new voting members rotating onto the committee this year whose outlook is more in line with those who prefer accommodation, you can get even more comfortable with the fact that rates are likely to remain low for a long time.
The most recent news from the Fed is that they will now be providing us with their internal forecasts for where they see Fed Funds going. A friend of mine laughed recently and said “so much for the Fed Funds Futures market.” I had to laugh too…what will all of those traders do now that the Fed has pulled the rug out from under them? I put out a short Market Update on 1/4/11 that gives an overview of the Feds new communication policy if you are interested in their new communication plans.
What to think about 2012
As you think about 2012 and what it might bring I want challenge you with the following task. Find a way to fill in the blank on the following question: “In 2012 economic growth will come from _______”.
If you come up with an answer that you find believable then you will likely be planning on increased economic growth and higher interest rates right around the corner.
If you can’t fill in the blank with a believable answer then you’re in good company. I don’t know what to put in that blank, and I haven’t spoken to anyone who can fill in that blank. The Fed certainly can’t…which is why they are committed to holding rates low through at least mid-2013…and there is no shortage of speculation that they could leave them there a lot longer than that.
To me it looks like 2012 will be another year full of excuses for why we won’t have any decent growth. In 2011 earthquakes and uprisings in the middle-east were the excuses for our lack of growth in the first half of the year. The longer it went on the more we were told that we’d get our growth spurt in the second half. Then the second half got here and there was no growth…and then Europe started melting down…and then everyone realized it just wasn’t going to happen in 2011.
Now we are starting 2012 with slim pickin’s for growth prospects…and a whole new slate of potential excuses for why we’re still in the ditch.
Wildcard events for 2012
Below are a few items that should haunt the headlines at some point in 2012. These all have the potential to become roadblocks to growth in 2012. I’m certain there are a lot more out there…these are just the ones I could think of with one cup of coffee in me.
Iran – There is a lot of talk about somebody smacking Iran hard before they can build a nuke. I have no idea what the odds are of this happening…but I think I’m safe in saying that if that happens we should expect a big rally in Treasuries with prices going up and yields dropping.
North Korea – North Korea just lost their leader. You might think he was just a guy with a bad haircut that wore a Members Only jacket and platform shoes…but apparently he talked/coerced many into believing that he was a god of some sort.
This is a country that launched a missile at Hawaii on the 4th of July when they had STABLE leadership. I can see why the experts are concerned about their potential for creating instability now that there is a new and untested twenty-something year old guy at the helm.
Europe – At this point it feels like the consensus is becoming that Europe will just be a big drag on everyone. It seems like a lot of the big scary stories about the breakup of the Euro and “war-on-the-continent” have faded and now it has become a game of “how long we can drag this out before we have to admit that it won’t work.”
The Election – We will surely get a non-stop drumbeat of news this year regarding the economic plans and fixes from both the incumbent and the challengers. I wish we could just fast forward to the end but it’s not that easy…we’ll have to put up with 11 months of headlines and debates that will jostle the markets along the way. This is a big wildcard for sure. I have no idea how the election will impact the markets…but I know that it will impact them. There isn’t much more color I can provide on that topic.
Military drawdown – If you’re a student of history you know that once the wars are over the US makes drastic cuts to its military. It happens after every war and given our current fiscal condition one might expect these cuts to be even deeper than usual.
This should have at least two impacts. First is that it’s a drop in government spending, which in the absence of a corresponding increase in another area will have a negative effect on GDP (this isn’t an argument for keeping the military at current levels…it’s just worth noting that government spending has been propping up GDP and this will be a reduction in that support). This spending has been on items ranging from salaries for active duty military and civilian contractors to the acquisition of high dollar weapons systems.
Many people don’t realize how expensive military hardware really is. Sebastian Junger gave a good example of the economics of conflict in his recent book about combat in Afghanistan titled “War”. He said that one day he marveled at the complexity of it all as he watched an $80,000 shoulder fired missile, get launched by a guy who doesn’t make that much in a year, at a guy who doesn’t make that much in a lifetime. The point is that governments spend a LOT on war when it happens…and that spending will soon be cut drastically.
Additionally, these cuts will transition a lot of people from government contract work and military service…into the domestic job market…where there are very few opportunities awaiting them. This will put some amount of upward pressure on the unemployment rate.
So what should we tell our recent college graduate?
So now I’m sitting here staring at the college graduate across from me and pondering what to tell him. From where I sit his choice is this…he can go out into the real world where he will likely have to wait a long time just to find a low paying job that doesn’t match his skill set…or he can go back to college, study a little, hit happy hour three nights a week, go to football games or hunting or fishing on the weekends, and ride out the worst business cycle he is likely to see in his lifetime in relative ease.
My answer is that he better apply quickly…because grad school sounds pretty sweet and I might beat him to it if he doesn’t.
What will you tell him?
If you have any questions or if there is anything I can be doing for you just let me know.
Steve Scaramastro, SVP
800-311-0707
INTENDED FOR INSTITUTIONAL INVESTORS ONLY. The information included herein has been obtained from sources deemed reliable, but it is not in any way guaranteed, and it, together with any opinions expressed, is subject to change at any time. Any and all details offered in this publication are preliminary and are therefore subject to change at any time. This has been prepared for general information purposes only and does not consider the specific investment objectives, financial situation and particular needs of any individual or institution. This information is, by its very nature, incomplete and specifically lacks information critical to making final investment decisions. Investors should seek financial advice as to the appropriateness of investing in any securities or investment strategies mentioned or recommended. The accuracy of the financial projections is dependent on the occurrence of future events which cannot be assured; therefore, the actual results achieved during the projection period may vary from the projections. Interest rate swaps and derivatives are offered and sold via Vining Sparks Interest Rate Products, LLC. The firm may have positions, long or short, in any or all securities mentioned. Member FINRA/SIPC.
Thursday, December 15, 2011
Market Udpate 12 15 11 _ Against the wind
It’s been a boring few weeks around here lately. No fishing, no jumping out of planes, no mountain biking, no travelling…it was all rainy days and sick kids until Saturday. What changed on Saturday? Last week I got an invitation to go to the Bob Seger concert at the FedEx Forum here in Memphis…and these were front row seats. I immediately jumped on the invite and began counting the days until the show.
The first thing you notice at a Bob Seger concert is that Bob Seger has gotten really, really old. His hair is gray and he’s wearing orthopedic shoes, and the stage is padded/carpeted and you start to feel a little sorry for the guy when he walks out. The average age of the band looks to be about 100. The second thing you notice is that these guys absolutely rock. Halfway through the second song I turned to my wife and told her I hope I’m half as cool as Bob Seger when I get to be his age. She assured me I’m already that cool but I think she was just saying it so she wouldn’t have to walk home. It was an awesome event…many times you could hear the entire stadium singing along over the volume of the band. Everyone was on board and rocking in the same direction. This was a really strong performance for a guy whose first album came out the year I was born.
What does this have to do with monetary policy?
The first thing that comes to mind is that the Fed, like the members of Bob Segers band, is almost 100 years old. The Federal Reserve System was founded in 1913…the same year the Post Office began parcel deliveries…which might be an ominous parallel.
The second thing that comes to mind is that not everything ages well. Bob Seger is going to rock all the way to the grave…he will be as relevant the day he dies as the day he released his first album. The Fed, however, may not have what it takes to remain as relevant.
In fairness, the Fed has a much more difficult operating environment than Seger does. In the old “US Centric” model the Fed had a lot of leverage and could exert significant control over the system with the traditional tools they had available (Open Market Operations, Reserve Requirements and the Discount Rate). Nowadays we have a global economy, with many developed economies working to maximize their positions versus the rest of the world. Hundreds of economies and currencies, many with powerful central banks, are all working day and night to advance their own positions on the global stage. Capital can flow into and out of most countries almost instantaneously, and the exchange rate of that capital is also fluctuating in real time. This is the world in which the Fed must now operate. It is a far cry from the environment that spawned them in 1913. In 1913 most people didn’t own cars...there had never been a phone call from the west coast to the east coast…and I find it interesting to note that prior to 1913 there was no personal income tax in the United States…my what a different world that must have been. Nowadays most families have at least two cars, everyone over the age of 8 has a phone, and I don’t even want to start talking about income taxes.
Many of the tools the Fed has used for the past 100 years are no longer as powerful as they once were. Years ago in the old US-Centric model the Fed may have been able to create a significant economic impact with a 50 basis point cut in the overnight rate. Now with a high-tech and fast-paced global economy we are down to zero percent on Fed Funds…and it’s still not enough. The Fed can’t get the traction they desire so they come out with various Quantitative Easing programs in an attempt to get additional leverage on the problem. Those measures have also come up short. We are now four years into this economic downturn, the fed has ballooned its balance sheet, taken the overnight rate to zero, unemployment is still hovering near 9% with many arguing that “structural” unemployment is taking hold, and just this week they reiterated their pledge to leave rates at zero through mid-2013.
Despite all of the Feds actions the economy is still in the dumps. They simply can’t jump start things the way they used to. As we enter 2012 I think it’s helpful to take a good hard look at where we are, and what we should realistically expect from the Fed over the next 12 months.
I wouldn’t count on the Fed riding to the rescue of the economy in 2012. It is readily apparent that they don’t have a magic bullet for the issues that confront us…but it will be helpful to know what their plans are none-the-less.
What can you count on?
If you can bank on one thing it’s the Feds statements. They have gone to great lengths to improve communication with regard to policy. When they’ve told us they were going to do something…they have done it. So while their monetary policy tools may not be as effective as they used to be…they at least have a solid track record of following through on their statements.
The first thing to recall is that their baseline forecast is for the overnight rate to remain at zero percent through mid-2013. If you are still holding your breath in Fed Funds hoping for a rapid rise in the overnight rate it looks like you’re might pass out before that day comes. We have an analysis that shows “the cost of waiting” to help people determine if they are better off staying in Fed Funds or investing given their outlook on rates. If you’d like to see this report just shoot me an e-mail and we can run the report. This report will show you the difference in income between your Fed Funds projection and any investment you’d like to use as a comparison.
The second big item is that they remain committed to reinvesting cash flows from their securities portfolio to fund the purchase of longer maturity Mortgage Backed Securities. The goal here is to help the housing market by keeping downward pressure on mortgage rates.
As we enter 2012 these seem to be the “constants” that we are getting from the Fed and I would certainly build them into my thinking for 2012.
So these are just some random thoughts on the Fed, their past, and our future.
Now every time I read an FOMC statement I think of their 1913 start date and I look at all they’ve done right up until yesterday…and my focus fades from the words leaving Bernanke’s mouth at the press conference…and I start to hear Bob Seger singing softly in the background…
The years rolled slowly past
And I found myself alone
Surrounded by strangers I thought were my friends
I found myself further and further from my home
And I guess I lost my way
There were oh so many roads
I was living to run and running to live
Never worried about paying or even how much I owed
Moving eight miles a minute for months at a time
Breaking all of the rules that would bend
I began to find myself searching
Searching for shelter again and again
Against the wind
A little something against the wind
I found myself seeking shelter against the wind
If you have any questions or if there is anything I can be doing for you just let me know.
Steve Scaramastro, SVP
800-311-0707
INTENDED FOR INSTITUTIONAL INVESTORS ONLY. The information included herein has been obtained from sources deemed reliable, but it is not in any way guaranteed, and it, together with any opinions expressed, is subject to change at any time. Any and all details offered in this publication are preliminary and are therefore subject to change at any time. This has been prepared for general information purposes only and does not consider the specific investment objectives, financial situation and particular needs of any individual or institution. This information is, by its very nature, incomplete and specifically lacks information critical to making final investment decisions. Investors should seek financial advice as to the appropriateness of investing in any securities or investment strategies mentioned or recommended. The accuracy of the financial projections is dependent on the occurrence of future events which cannot be assured; therefore, the actual results achieved during the projection period may vary from the projections. Interest rate swaps and derivatives are offered and sold via Vining Sparks Interest Rate Products, LLC. The firm may have positions, long or short, in any or all securities mentioned. Member FINRA/SIPC.
Wednesday, November 30, 2011
Market Update 11 29 11 _ Holiday Cheer
Yaaaay…it’s all better!
Yesterday morning we had snow here in Memphis, TN. Normally just the forecast of snow would mean car crashes and snarled traffic in this town...but yesterday it was magical…there were no traffic problems at all and I arrived at work remarkably un-stressed from the commute.
After I parked my eco-friendly 5,500 lb, 4x4, V8 powered pickup truck I walked through the parking garage where I could see the snow falling outside and the intercom system was playing Bruce Springsteen’s “Santa Claus is Coming to Town” and the air was just crisp enough to remind you that it’s early winter. I sipped my coffee as I walked and took in the sights and sounds and I felt very much in the holiday spirit for the first time this year. I even passed a sign near the front door that read “Santa Parking Only”. Geez…this is perfect.
For a moment I thought I had landed in Mayberry. Then I came inside, sat down at my desk, and saw the headlines. Troubles continue to rage in the Eurozone…a breakup is being rumored…businesses and governments are making plans on how to deal with the potential disaster. A co-worker then pointed out what had to be the quote of the day. It came from Poland’s foreign minister Radek Sikorsky. He was giving a speech about the euro and he expressed that Poland’s largest threat wasn’t an attack by a neighboring country or rogue state…their biggest threat was the collapse of the Euro; and he viewed Germany as the one player that could avert that disaster. He said:
“And I demand of Germany that, for your own sake and for ours, you help it (the Euro) survive and prosper. You know full well that nobody else can do it. I will probably be first Polish foreign minister in history to say so, but here it is: I fear German power less than I am beginning to fear German inactivity.”
I frequently joke that if I were Greece I would be very uncomfortable having my fate in the hands of the Germans due to historical precedent. But that’s just little-ol-me…a fixed-income salesman and former Marine from Memphis TN with a dark sense of humor…nobody cares what I think. Here, however, we have no-less-than the foreign minister of POLAND…the country that hosted Germany on their first away-game of WWII…saying something not too far removed from my quip on Greece. Poland now sees Germany as its best chance of survival. I’m starting to hear tones of Princess Leia ringing in his statement: “Help us Obi-Wan, you’re our only hope”.
So, yesterday went from “winter wonderland and Christmas music” to seeing the victims of the Blitzkrieg begging for help from the Germans of all people. Just when I’m confident that this crisis can’t get any weirder this happens.
What a difference a day makes
Today we have a much different set of stories in the market. On September 9th I wrote a piece titled “Smells like Coordination”. That piece basically said that based on what I was seeing at that time it seemed like another round of coordination between Central Banks might be in the offing. As it turns out it appears that they were in fact scheming along those lines…this morning we see the results…six Central Banks have announced coordinated efforts to help ease pressure created by the crisis in Europe.
The Fed, ECB (European Central Bank), Bank of Canada, Bank of England, Bank of Japan, and the Swiss National Bank have all coordinated their efforts. The short story is that they are essentially providing guarantees of cheap liquidity in a number of currencies through February.
European banks had seen their cost on dollar denominated loans increasing recently as potential lenders watched with alarm as problems in Europe escalated. Fear not…the Central Banks are riding to the rescue with more cheap money. This is a continuation of the recurring strategy of “buying time” that has come to define much of this business cycle.
It’s like Broadway
I don’t often go to see a “play”…you know…like on a stage in a theater. I have however been to one or two in the distant past so any of you who like to call me completely uncultured will have to dial it back just a notch.
Today’s market activity reminds me of the theater. On stage right now I have a group of actors who are singing about a recovery. The songs are all about the ADP Employment figures being higher, and Pending Home Sales rising, and Black Friday Sales going through the roof...and the Dow is up 400 and the 10-year is up to a 2.09%, and all of the actors are happy and singing and everything is great. But backstage behind the curtain the stagehands (represented by the Central Banks) are fighting like mad to put out a fire that is threatening to burn up all of the props needed for the next scene…and maybe even the theater itself.
Seen from this point of view it’s difficult for me to get excited that the play is going to be a great one. Normally what would happen is that during the intermission I could try to talk the wife into going to a sports bar instead of seeing the second half of the play…but I’m afraid this one will end like the others…I have no hope of getting out of watching the whole thing unfold. Good or bad we’ll all have to stay here and watch the rest of the play.
If you have any questions or if there is anything I can be doing for you just let me know.
Steve Scaramastro, SVP
800-311-0707
Monday, November 7, 2011
Market Update _ Grocery shopping and sector analysis
Last night I was in the kitchen when the wife came home from the grocery store. As she was putting the groceries away she announced that she had just bought some special apples that taste like grapes. Curious, I asked how much she paid for them. She responded with “I don’t know…why?”
“Because if they’re more expensive than grapes we just got robbed.” I replied. After all, why would I pay up to get something that “tastes like” grapes if I can get the actual grapes cheaper? She quickly brushed aside my economic commentary on our groceries and left the room. Tough crowd.
Many people will look at the “apples that taste like grapes” story as tale of a unique culinary/scientific achievement…but when I see these grape-flavored apples on my counter-top I see a sector-analysis story.
Why do these funky apples remind me of sector analysis? Because if I like grapes, but grapes are expensive, I might be able to find a really good grape-substitute in another part of the fruit world. In this case if I can get the grape-flavored apples cheaper than grapes themselves then there is some value available there and I’m willing to purchase them. Same grape taste in a little bit different package at a lower price? Great…sign me up.
This in turn leads me to the investment portfolio. If I’m an Agency Callable buyer, but callable yields have dropped, maybe I can find some yield in another product that has the same maturity/average life/price volatility characteristics.
How about an example?
A very recent example is in the world of Callable Agency bonds. Consider the following numbers:
A 3 year non-call 1 year with a one-time call will bring you a 0.75% yield today
A basket of 3 year CD’s with no call options, and zero risk weight will bring you a 1.50% yield (with the convenience of DTC delivery)
You get a lot more grapes for your money with the CD than with the callable. In fact you get twice as many grapes for the same price. Supplies are limited on the CD side so there is a limit before you have to go back to buying callables but it shows that you can occasionally get some shots off at much better levels if you keep looking in all areas.
Another example would be:
A 4 year non-call 3 month brings 1.125% with -11.00% price volatility this morning
A 10 year 3.00% MBS currently brings 1.65% yield in the base case with -11.00% price volatility
Again we get more grapes for our money.
Wrapping it up
If you’re looking to put money to work as we head into the end of the year remember to look around and pick up value where you can find it. Compare sectors and make sure you’re getting the most bang for your buck.
If you have any questions or if there is anything I can be doing for you just let me know.
Steve Scaramastro, SVP
800-311-0707