A Quick Summary of the SEC’s New Money Market Rules

Last Wednesday, the SEC approved amendments on money market fund (MMF) rules. My colleague, Seth Roman, a portfolio manager who specializes in the sector, summarized the areas of reform as they relate to institutional and retail money market investors. I thought I’d share that with you here.

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2013 A Pretty Good Year

This time last year we were bullish about equities and positive on the slow but steady strengthening of the economy. The market did not disappoint. The economy was almost heroic, you might say, with its performance enduring government sequestrations and higher taxes almost a 2% drag on GDP but comporting with our expectations of 2 – 2.5% growth. 2013 is ending with GDP and the markets coming fairly close to what we thought they’d achieve. Now the year is almost out, so let’s take stock of 2013 but look ahead to 2014. Continue reading

What Happens if the Government Shuts Down and Nobody Notices?

Yes, this is a facetiously philosophical title (what is the sound of one hand clapping?) that pokes fun at the current situation in Washington. And we’re well aware that if Republicans and Democrats can’t reach a compromise in a couple of weeks to deal with the debt ceiling “time-bomb”, none of us will be joking around.

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Teenage Melodrama and the Market’s Infatuation with QE

Like a teenager caught between the decision of going to college and leaving friends behind or living in the comfort of home and going nowhere, debt markets have been reeling between taper angst and infinite quantitative easing euphoria.

And like that teenager, investors are wondering, “Where should I go from here?” The problem is the cues we have been trained to watch for. Unemployment (was that a 6.5% or 7% target?), inflation, or, wait . . . no, it’s housing prices, right? We are now all confused, adrift without anchorage! Continue reading

The Next Big Challenge to Investors: Rising Rates

Many investors were conditioned to accept that the economy would be in the rehabilitation ward for the foreseeable future, rates would remain low, and monetary stimulus would continue unabated. It was an increasingly dangerous mindset. Now that’s changing with the slow but steady recovery of the economy and the Federal Reserve’s announcement in August that it may begin “tapering” its billions in monthly bond purchases designed to keep rates low and boost asset prices. These fiscal, financial and policy changes usher in the next great risk for bond investors: the potential return of higher interest rates. So I continue on the subject of “duration” and the risk that it poses to fixed income investors. Continue reading

Four Interest Rate Scenarios We Could Face

I’ve written a lot lately on the subject of “duration” and its potential impact on investor portfolios, now that the initial goals of the Federal Reserve’s “Great Monetary Experiment” appear largely accomplished — and tapering of its monthly purchase of Treasuries to keep rates low is on the table. The era of lowering interest rates and rising bond prices looks finally at an end, with no place for rates to go but up. It’s vital, then, that investors think about the impact that rising bond yields could have on their portfolios. Here are a few scenarios we might see. Continue reading

Detroit: Teetering Domino of the Municipal Bond Market?

My colleague, Jonathan Chirunga, is a municipal bond credit analyst and portfolio manager at Pioneer who offered these thoughts on Detroit and the impact of its potential bankruptcy on the municipal bond market.

Pundits have been calling for Municipal Armageddon since the Great Financial Crisis (GFC) of 2008. A combination of runaway debt issuance, plummeting tax receipts, massively underfunded pensions, and, in some cases, outright corruption, were all elements of the plotline. In 2010, a now notorious “Chicken Little” alarm sent the Municipal market into a tailspin, auguring default for hundreds of billions in municipal securities as cities and municipalities collapsed in domino-like fashion. Just recently, the municipal market took another hit – this time as a result of a violent back up in treasuries as investors (ironically) now see a greater risk in faster-than-expected economic recovery. But during this period of time the poster child of the Domino crowd—Detroit sought bankruptcy protection. Thus, the question remains: is this the beginning of a larger default wave? In which case, could municipal securities get slammed from both a simultaneous rise in interest rate risk and credit risk? Continue reading

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