Category Archives: Bonds

On December 16, 2015, the Federal Reserve announced that it was raising interest rates. More specifically, it raised its target for the so-called federal funds rate. Before talking about just what is the federal funds rate, we’d like to point out what it is not: It is not mortgage rates It is not bond interest rates It is not muni bond rates It is not T-Bill rates It is not CD rates It is not the ...

readmore

Over the weekend, the Greek Prime Minister broke off further talks with the European Union group over restructuring its debts. The European Central Bank froze funding to Greek banks, forcing them to shut their doors for a week to prevent a widespread bank collapse in Greece. This morning, stocks in all global markets are down, albeit not much more than we sometimes experience from time to time. US interest rates ...

readmore

I received a copy of a research newsletter from Brown Brothers Harriman, a prominent private bank based in New York. The piece is titled, "Does G.O. Spell Go?" and makes the valid point that municipalities around the country are under credit stress, and that general obligation ("GO") bonds are not always as secure as they've always been perceived to be. BBH lumps Stockton and San Bernardino, CA with Detroit, MI as "...examples of ...

readmore

We get electronic alerts from our clients' security custodians (Schwab and Fidelity) whenever something happens that they judge warrants our attention. Last night, we received 233 separate alerts -- each of which delivered the news that Moody's had upgraded its credit ratings on a particular municipal bond. The ratings involved school district voter-approved general obligation (GO) bonds, and the ratings went from the existing Baa1 up to A3. As we have ...

readmore

Imagine you could make a time-jump a few years out into the future. What might you expect to be different? You'd know what the iPhone 7 looks like. You'd know whether the Ravens and Niners had a rematch, and who won. You'd also know the level of interest rates after the Fed winds down its bond-buying program. While nothing is certain, most investors assume that interest rates will be higher in a ...

readmore

Summary of conversation we have with clients a few times a week: Aren't you worried about interest rates going up? The ten-year treasury is only paying 1.7%...rates are probably probably going to go up, and bond prices decline when interest rates go up. Why are you buying 10-year muni bonds? Simple answer: Because the muni bond yields are high enough to provide us a fair rate of after-tax return, even if ...

readmore

We get calls from journalists from time to time. Here are links to a few of our thoughts, as reported by online news sources: FoxBusiness had Rick as a guest again, talking about investing in 2012. "Invest cautiously in 2012. Preserve capital." The Chicago Sun-Times interviewed Rick about higher-yielding investments. September 2011. "In his view, the stock market is priced for 'a continued and unbroken economic recovery.”'But the bond market 'is priced for a ...

readmore

Debt Reduction the Post-War Way In the 35 years following the end of WWII, the rate of inflation exceeded the interest rate on our government's debt about a quarter of the time. The so-called "real rate" of interest was negative, and materially so. In the estimation of Carmen Reinhart and Belen Sbrancia, in a paper published in March of this year, a negative real rate of interest resulted in America's goverment ...

readmore

Our hearts and hopes are with Japan. The earthquake, tsunami and nuclear crisis are inflicting untold suffering on the people of a proud and noble nation. We wish them a quick and safe return to some semblance of normalcy. While our hearts think only of the human toll, with our heads we think about our clients' portfolios. We spent time over the weekend and these past few work days considering what, ...

readmore
Nov
03

The monetary printing presses, that is. As expected, the Federal Reserve Board of Governors announced today the resumption of its "Quantitative Easing" program. That's a nice academic euphemism for "printing money." The Fed will be reaching out into the capital markets and buying six hundred billion dollars of Treasury bonds. For reference, that's about half of current annual federal borrowing. The objective of the policy is to pull down longer-term ...

readmore