Archive for September, 2014

LIBOR Continues to Misprice Fed Rate Hike Expectations

September 29, 2014  |   Uncategorized   |     |   0 Comment

We put together a quick graph of short term interest rates and the market’s expectations of future rates.  The current LIBOR curve as measured by the LIBOR Futures market predicts rates to rise to between 1.09% and 1.95% from December 2015 to September 2016 (Charted as the blue shaded line below).  We then assumed that the Federal Reserve would begin to raise the Fed Funds rate in March 2015 and do so in 25bps increments ...

August 2014 Monthly Commentary

September 19, 2014  |   Monthly Commentary   |     |   0 Comment

The bond market staged a strong rally in the liquidity-starved month of August as professional traders and arbitrageurs squeezed shorts, pushing bond prices higher and the yield curve flatter.  The rally came despite continued economic strength and was accomplished in conjunction with a rally in equity prices.  Typically, bond and stock prices move in the opposite direction, but in August, the yield-to-maturity of the 30-year Treasury bond fell 24 basis points while the S&P 500 ...

Financial Times – 9/18/14

September 19, 2014  |   Financial Times,In the News   |     |   0 Comment

“The demand for bonds has been so great in recent years that people have looked beyond the credit rating as they just want yield – any type of yield,” says Michael Kastner of Halyard Asset Management. Corporate bond ratings do not discern risk