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Rubicon Associates is headed by a Chartered Financial Analyst with over 20 years of experience in the investment management industry focused on the analysis, investment and management of fixed income and preferred stock portfolios. Over the years, he has analyzed and invested in both public and... More
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  • GDP - Data Pushes The "Nowcast" Lower

    Data this morning pushed the GDP Nowcast lower. The way data has been coming in, the timing of "liftoff" is getting pushed into 2016 by the market. This should help interest sensitive sectors.

    Latest forecast - October 14, 2015

    The GDPNow model nowcast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2015 is 0.9 percent on October 14, down from 1.0 percent on October 9. The model's nowcast for real consumer spending growth in the third quarter fell from 3.6 percent to 3.2 percent after this morning's retail sales report from the U.S. Census Bureau. This was partly offset by an 0.1 percentage point increase in the nowcast for the contribution of inventory investment to third-quarter real GDP growth following this morning's update on retail inventories from the Census Bureau.

    Evolution of Atlanta Fed GDPNow real GDP forecast

    Tags: gdp, economics
    Oct 14 1:16 PM | Link | Comment!
  • GDPNow Update

    Slight tick-up in the nowcast for GDP. The level should rule out an October hike, but December is still on the table despite what futures are saying (Mar '16). I still think December is the month, and a rate hike will be well received due to the optics and the "it's all good" message.

    From the site:

    The GDPNow model nowcast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2015 is 1.1 percent on October 6, up from 0.9 percent on October 1. The model's nowcast of the third-quarter growth rate in real personal consumption expenditures increased 0.2 percentage points to 3.6 percent following yesterday's light motor vehicle sales release from the U.S. Bureau of Economic Analysis. After this morning's international trade report from the U.S. Census Bureau, the model nowcasts of real net exports and real equipment investment each increased modestly.

    Evolution of Atlanta Fed GDPNow real GDP forecast

    Tags: GDP, economy
    Oct 06 11:39 AM | Link | Comment!
  • Bond Market Liquidity

    I tend to disagree with the following assessment of liquidity and the impact of shrinking dealer balance sheets and risk tolerance, but this is just borne of my experience in the credit markets over the last couple of decades. It is, in my opinion, harder to transact and dealer positions are more limited. looking at bid/ask spreads of go-go bonds doesn't quite give on the feel for liquidity when one is looking to establish/exit a position (strip out financials and see how you do). That said, I am not sure one can say "liquidity is lower". Rather, "liquidity costs more" might be a better way to put it. There is an increased cost of risk in the "new world".


    FRBNY has posted a new article on their Liberty Street Economics blog entitled "Has U.S. Corporate Bond Market Liquidity Deteriorated?" The following are some highlights:

    • Trading volume has risen over time, especially since the financial crisis, but at a slower rate than debt outstanding. It follows that turnover rates-the ratio of trading volume to debt outstanding-for corporate bonds have declined, which is often pointed to as evidence of reduced liquidity.
    • average trade size has declined since the crisis. Some market commentators see this trend as evidence that investors find it more difficult to execute large trades and so are splitting orders into smaller trades to lessen their price impact.
    • Since the Financial Industry Regulatory Authority (FINRA) introduced its Trade Reporting and Compliance Engine (TRACE) in 2002, corporate bond bid-ask spreads have narrowed. This trend was interrupted during the 2007-2009 financial crisis, but resumed afterwards. The current level of bid-ask spreads is even lower than pre-crisis levels.
    • [trade] price impact has been declining since the crisis and is now well below pre-crisis levels.

    In conclusion, the price-based liquidity measures-bid-ask spreads and price impact-are very low by historical standards, indicating ample liquidity in corporate bond markets. This is a remarkable finding, given that dealer ownership of corporate bonds has declined markedly as dealers have shifted from a "principal" to an "agency" model of trading. These findings suggest a shift in market structure, in which liquidity provision is not exclusively provided by dealers but also by other market participants, including hedge funds and high-frequency-trading firms.

    Tags: liquidity, bonds
    Oct 06 8:33 AM | Link | Comment!
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  • $F (Motor Credit) selling bench 5y and 10yr tap. +170 and +185 talk. Deals coming tighter than talk though. Existing 8/25s trade +170.
    Nov 4, 2015
  • $MSFT does $10B across the curve. $1.75b 3y +30, $2.25b 5y +50, $1b 7y +75, $3b 10y +95, $1b 20y +125, $3b 30y +150, $1b 40y +180
    Oct 29, 2015
  • Dr Pepper Snapple to Sell $750m 10y, 30y Debt; initial thoughts +150, +180 - probably come tighter - everything has.
    Oct 29, 2015
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