The Take
on what the market gives us…
2H-23 Bond Market Outlook: Get Ready for the Heat Lamp Economy
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July 10, 2023
Whether or not we have a recession isn’t the only key theme for the second half of 2023. The Federal Reserve (Fed) has clearly committed to a higher-for-longer interest rate policy and that means credit fundamentals will be under pressure. This will stress liquidity, exacerbate idiosyncratic credit risks, and heighten spread volatility. We recommend moving up-in-quality and liquidity while stressing credit metrics for a prolonged period under the heat lamp of restrictive monetary conditions. Read More
A 10 out of 10 for Year 10
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June 22, 2023
After weathering the storm induced by an acute March banking crisis (how was that only three months ago?!) and trying to decipher the Fed’s endless rhetoric, we at IR+M were incredibly grateful for the arrival of our annual IR+M Gives BACK (Bonding about Charity and Kindness) Week in June. Read More
The Original Issue Discount Trend in ABS: Attractive Bargain, or Value Trap?
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June 7, 2023
Once a feature largely confined to the High Yield corporate bond market, bonds issued below par are becoming more common within the investment grade Asset-Backed Securities (ABS) market. Bond buyers need to examine the risks before investing, given that extension – rather than impairment – is the more relevant risk for senior ABS bondholders. Moreover, the investment grade ratings that ABS carry do not reflect this risk. Read More
Time (Again) To Think About Debt Ceiling Risks
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May 5, 2023
Admittedly, the debt ceiling showdowns are not my favorite thought exercises. Given the unpredictability of American politics, especially as of late, the risks of an actual default are next to impossible to handicap ex-ante. It’s one of those tail risks in which a small probability times a large impact equals an expected value that cannot be ignored. So, with the date potentially less than a month away, we consider both the immediate technical and lasting economic consequences of a resolution, one way or the other. Read More
Beware of The Hidden Tax of Money Market Funds
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April 13, 2023
Over the last year, the landscape for short-term investments has changed dramatically, with the Federal Reserve (Fed) enacting its first rate hike in four years in March 2022. With each Fed rate increase, the yields of short duration fixed income have risen in sympathy, some more notably than others. Given the elevated absolute level of rates, the opportunity cost of not evaluating short term and cash investment options has grown. However, that decision is more nuanced than just evaluating stated yields. Read More
March Madness in Bonds
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March 21, 2023
It’s amazing that the Federal Reserve (Fed) kicked-off this unprecedented tightening cycle with an initial 25bp rate hike only 12 months ago. Since then, they have meticulously pondered each turn of the screw against a plethora of slowing economic data. Then came the ghosts of the Great Financial Crisis (GFC). Read More
The Market Giveth and the Market Taketh Away
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February 28, 2023
History has taught us markets can be generous or punishing. Hindsight is 20/20, but LDI discipline can protect funded status gains in the face of market volatility. Read More
Commercial ABS Debt Maturity Wall: “Die Another Day”
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February 13, 2023
At this juncture in the bond market, many Commercial ABS issuers seem to have found themselves in the plot of a James Bond thriller. Commercial ABS bond yields have more than doubled over the last year as the Federal Reserve (Fed) battles inflation, creating refinancing risk for issuers with balloon-style repayment structures. Thanks to a very manageable near-term debt maturity schedule, however, many Commercial ABS issuers just might live to “Die Another Day.” Read More
What Has Really Changed?
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February 8, 2023
Bond market technicals have done a complete about face since the beginning of 2023. With only a modest improvement in the macro-economic data, two key “gut-check” questions are, 1) what has really changed, and 2) are the changes here to stay? Read More
Game of Knowns: The Bond Market in 1H-2023
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January 9, 2023
While tremendous political, economic, and market uncertainty remains, here are ten reasons investors can take comfort in the bond market to start 2023. Read More