Today - Tuesday, March 31, 2015
- “Companies value secrecy and don’t want people doing analysis," says Martin Fridson. "The more they can keep investors in the dark the better it’s been for them.”
- More than 55% of speculative-grade debt sold this year was through deals known as private placements for life (144a-for-life) - thus requiring no public registration, according to S&P Capital IQ. That's up from 40% last year - a record until now.
- Fridson: “Deals are getting worse and worse for the investor, and they have been powerless to stop it ... The only winners are issuers and their underwriters."
- Source: Bloomberg
- Meanwhile, junk has risen back to the top of the fixed-income heap, returning 2.5% in Q1, topping investment-grade, muni, and U.S. government debt.
- ETFs: HYG, JNK, HYLD, SJB, ANGL, HYLS, UJB, XOVR, QLTC
- In what would be the longest winning streak in more than a decade, U.S. Treasury bonds are on pace for their fifth straight quarterly price gain, with the yield on the 10-year note of 1.95% comparing to 2.17% at the year's start.
- The last time the yield fell for five straight quarters was March 2001.
- Overall, the Treasury market has punched out a total return in Q1 of 1.48% following a return of 5.05% in 2014.
- The Fed is hellbent on tightening monetary policy, but - as good as long-term Treasurys have performed - the yield differential with the rest of the developed world continues to grow and continues to drive foreign money to U.S. shores. Ten-year Bunds are yielding 0.191%, 10-year Gilts 1.57%, and Spain and Italy 10-year paper yields less than 1.3%.
- The March employment report is set for release on Friday morning.
- Previously: Chicago PMI at the lowest level since 2009 (March 31)
- ETFs: TBT, TLT, TMV, IEF, TBF, EDV, TMF, PST, TTT, ZROZ, SBND, TLH, IEI, TYO, VGLT, DLBS, DTYS, UST, UBT, TLO, PLW, VGIT, GOVT, TBX, GSY, TENZ, SCHR, DTYL, TYD, LBND, ITE, TYBS, DLBL, DFVL, FIVZ, TBZ, DFVS, TYNS, TAPR, SYTL
- "I expect that, unless incoming economic reports diverge substantially from projections, the case for raising rates will remain strong at the June meeting," says Richmond Fed boss Jeffrey Lacker, doing nothing to shake his hawkish reputation.
- He says he's looking past some of the weaker economic numbers of late, and blames the strong dollar and lower energy prices for the slow inflation prints.
- Lacker is a voter on the FOMC this year.
- Full speech
- Giving his second speech on the topic since Friday, Fed Vice Chairman Stanley Fischer declared that regulators must better monitor and consider new rules for the growing proportion of lending being done within the shadow banking sector.
- "Non-bank firms and activities can pose the same key vulnerabilities as banks, including high leverage, excessive maturity transformation, and complexity, all of which can lead to financial instability," said Fischer.
- The Financial Stability Board stated in a November report that U.S. financial assets held by non-banks reached $25.2T in 2013, exceeding pre-crisis levels.
Monday, March 30, 2015
- More than $120M of home equity lines of credit were originated in 2014, according to Equifax, up 21.5% from 2013. A total of 1.2M HELOCs were opened last year, up 15.8% from 2013. Both 2014 numbers are the highest since 2008.
- Meanwhile, mortgage industry write-offs continue to slide, with HELOCs of 4.3 basis points down 32.9%, mortgages of 5.2 basis points down 30.1%, and home equity installment loans of 8.1 basis points down 17.8%.
- Source: Press Release
- February Pending Home Sales: +3.1% to 106.9 vs. +0.4% expected, +1.2% (revised) prior.
- "Pending sales showed solid gains last month, driven by a steadily-improving labor market, mortgage rates hovering around 4 percent and the likelihood of more renters looking to hedge against increasing rents," said NAR chief economist Lawrence Yun.
Friday, March 27, 2015
- The 10-year Treasury yield remains lower by four basis points to 1.95% as Janet Yellen says the current path the economy is on virtually assures gradual rate hikes beginning later this year. Still, the Fed will remain data dependent and she mentions further weakness in inflation indicators as possibly forestalling rate hikes.
- Short-term interest rate futures are pricing in a 25 basis point boost in the fed funds rate by October.
- ETFs: TBT, TLT, TMV, TBF, EDV, TMF, TTT, ZROZ, SBND, TLH, VGLT, DLBS, UBT, TLO, TENZ, LBND, TYBS, DLBL
- The economy isn't fully there yet, but Janet Yellen - speaking at a San Francisco conference - does expect conditions to warrant boosting the fed funds rate later this year.
- Perhaps softening her stance on hikes a bit, Yellen says that while stronger inflation or wage growth isn't a prerequisite for boosted rates, a further weakening in key inflation indicators could put the Fed on hold for longer.
- Following the Fed's dovish policy statement last week, investors will again tune in to Fed Chair Janet Yellen, as the market struggles to figure out the timing of the next rate hike.
- After a week of volatile moves in bonds, stocks and currencies, Yellen will discuss her own view on how Fed policy should evolve from here.
- Friday's data also includes a final reading of fourth-quarter GDP, which is expected to rise to 2.4% from 2.2%, and consumer sentiment figures.
- The Senate early Friday passed a Republican budget plan that would cut domestic spending by $5.1T over 10 years.
- The non-binding budget, debated all week and passed 52-46 during a 15-hour marathon session before the Easter recess, gives Republicans another crack at repealing the Affordable Care Act, increases defense spending and slashes funds in other areas, including education and health care.
- The House passed a similar spending plan on Wednesday.
Thursday, March 26, 2015
- Down as low as 1.89% earlier in the session, the 10-year U.S. Treasury yield has popped all the way up to 2.01%.
- The last 24 hours may be a red flag to Treasury bulls; The 10-year yield was at 1.86% early yesterday and rose throughout the session even as stocks fell sharply - the first time in memory both stocks and Treasurys sold off on the same session. The selloff is a minor one today, but yields remain on the rise.
- TLT -1.7%, TBT +3.4%
- ETFs: TBT, TLT, TMV, IEF, TBF, EDV, TMF, PST, TTT, ZROZ, SBND, TLH, IEI, TYO, VGLT, DLBS, DTYS, UST, UBT, TLO, VGIT, TBX, GSY, SCHR, TENZ, DTYL, TYD, LBND, ITE, DLBL, TYBS, DFVL, TBZ, FIVZ, DFVS, TYNS, SYTL
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