Seeking Alpha

Rubicon Associates'  Instablog

Rubicon Associates
Send Message
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
My blog:
Follow me on twitter @RubiconAssoc
View Rubicon Associates' Instablogs on:
  • 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!
  • GDP - Weaker On International Trade

    The GDPNow model nowcast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2015 is 0.9 percent on October 1, down from 1.8 percent on September 28. The model's nowcast for the contribution of net exports to third-quarter real GDP growth fell 0.7 percentage points to -0.9 percentage points on September 29 following the advance report on U.S. international trade in goods from the U.S. Census Bureau.

    Evolution of Atlanta Fed GDPNow real GDP forecast

    Tags: GDP, economy
    Oct 01 1:09 PM | Link | Comment!
Full index of posts »
Latest Followers


  • NorthStar Realty Europ files ammended prospectus
    Sep 29, 2015
  • Fitch retracts $DLR release. Stuffing the cat back into the bag.
    Jul 13, 2015
  • Fitch affirms $DLR rating after Telx announcement. Yeah, don't see any announcement. Hmmm
    Jul 13, 2015
More »

Latest Comments

Most Commented
Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.