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Gold Shimmers in the Face of Fed Tightening

By Mark Heppenstall | November 9, 2017

After five years of disappointing returns, this year’s double-digit gains in gold prices have surprised many investors, especially in light of the Federal Reserve’s (Fed) continued monetary policy tightening. Conventional wisdom held that as the Fed hiked short-term interest rates, the higher opportunity cost to own gold would put additional downward pressure on prices.

Critical Week for Bonds

By David O'Malley | October 30, 2017

This week is a critical week for the bond market as 10-year Treasuries yields are trading above the 2.4% level that has been cited by Bill Gross of Janus as signaling a bear market. This sentiment was reinforced by Jeffrey Gundlach of DoubleLine’s comments when he called this “the moment of truth” for bonds. During the week, several key factors could significantly impact the near term movement of yields.

A Quick Guide to the Fed Chair Nominees

By John Swarr | October 26, 2017

This week’s Monday Morning O’Malley highlighted the upcoming selection of the next Federal Reserve (Fed) chair. The top candidates for the nomination include Jerome Powell, John Taylor, Janet Yellen, Kevin Warsh, and Gary Cohn. The Chart of the Week shows recent betting odds on who will receive the nomination. While the odds are fun to talk about, this week’s write-up covers the candidates’ viewpoints and policy stances so the risks behind the candidates can be anticipated. Investors should be prepared for any outcome by understanding how each candidate would lead the Fed on key issues including monetary policy, the balance sheet, transparency, and regulation.

Mortgage Opportunities After Quantitative Easing?

By Jen Ripper | September 28, 2017

Nearly ten years ago, the Federal Reserve (Fed) embarked upon what became known as quantitative easing as a way to combat the financial crisis of 2008. With the Fed Funds rate near zero percent, the Fed announced it would purchase U.S. Treasury notes and mortgage-backed securities. After three rounds of quantitative easing, the Fed ended its purchases in late 2014. During that time, the Fed has purchased nearly $1.78 trillion of agency mortgage-backed securities (MBS).

Fed Continues Hawkish Tone

By David O'Malley | September 25, 2017

The stock market held near record levels and interest rates were stable after the Federal Reserve (Fed) announced its much anticipated plan to shrink its balance sheet last week. Despite concerns about the impact of Fed interest rate increases on the long term economy and inflation outlook, the Fed took a constructive view of the dynamics impacting the economy. As a result of the relatively hawkish tone, the odds of a December rate hike increased. I still believe the Fed will hold off on increasing rates until 2018.

Stocks Make a New High

By David O'Malley | September 18, 2017

The S&P 500 closed above the 2,500 mark for the first time on Friday. The markets ended a strong week of gains driven by continued favorable conditions for economic growth and the prospects for potentially bipartisan action coming out of Washington.

Corporate Bond Credit Quality Moving Lower with Yields

By Mark Heppenstall | September 7, 2017

This week’s chart highlights the dramatic shift in credit quality for the corporate bond market during the past 30 years. Investment grade rated corporations have been on a 30-year borrowing binge judging by the increasing weight of BBB-rated credits in the Bloomberg Barclays Corporate Index. U.S. companies are taking advantage of lower and lower borrowing costs and embracing the use of higher leverage. Nearly half of the index is made up of BBB credits today ─ double the level from 30 years ago. Despite more than 60 companies being rated AAA in the 1980s, only Johnson & Johnson and Microsoft remain as the two U.S. companies with the top rating.

How Long Will our ‘Goldilocks’ Economy Under Trump Last?

By Penn Mutual Asset Management | August 9, 2017

Penn Mutual Asset Management CIO Mark Heppenstall contributed an article to The Hill where he discusses the current gridlock in Washington, the “new normal” economic environment and investment trends amid low volatility. Mark anticipates all these factors will extend the credit cycle into extra innings and enable the Fed to be patient with future rate hikes.

Investors Watching for Clues in the Federal Reserve Meeting and Second Quarter GDP This Week

By David O'Malley | July 24, 2017

Last week, markets traded mainly range bound as economic data and corporate earnings met expectations. In the week ahead, market participants will be closely watching for any clues from the Federal Open Market Committee (FOMC) statement on Wednesday. The Federal Reserve is widely expected to keep interest rates unchanged, but the meeting could provide important information on future policy.

30-Year Swap Spreads Get a Boost Wider from Capital Relief

By John Swarr | July 6, 2017

Second quarter U.S. dollar (USD) interest rate markets were very unexciting when looking at absolute movements in both swap rates and Treasury yields. However, an interesting development arose concerning the relative movement between the 30-year points of these two curves that will likely have the attention of market participants through the end of the year. The 30-year swap spread – defined as the difference between the 30-year swap rate and 30-year Treasury yield – has widened (or become less negative) significantly since June 13th, when the Treasury released its recommendations for financial industry reform, including a proposal to remove U.S. Treasuries (USTs) from the denominator of the supplementary leverage ratio (SLR) calculation. This proposal would effectively make USTs “cheaper” for banks to hold from a capital requirement perspective.



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The material provided here is for informational use only. The views expressed are those of the author, and do not necessarily reflect the views of Penn Mutual Asset Management.

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This material is for informational use only. The views expressed are those of the author, and do not necessarily reflect the views of Penn Mutual Asset Management.  This material is not intended to be relied upon as a forecast, research or investment advice, and it is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.

Opinions and statements of financial market trends that are based on current market conditions constitute judgment of the author and are subject to change without notice.  The information and opinions contained in this material are derived from sources deemed to be reliable but should not be assumed to be accurate or complete.  Statements that reflect projections or expectations of future financial or economic performance of the markets may be considered forward-looking statements.  Actual results may differ significantly.  Any forecasts contained in this material are based on various estimates and assumptions, and there can be no assurance that such estimates or assumptions will prove accurate.

Investing involves risk, including possible loss of principal.  Past performance is no guarantee of future results.  All information referenced in preparation of this material has been obtained from sources believed to be reliable, but accuracy and completeness are not guaranteed. There is no representation or warranty as to the accuracy of the information and Penn Mutual Asset Management shall have no liability for decisions based upon such information.

High-Yield bonds are subject to greater fluctuations in value and risk of loss of income and principal. Investing in higher yielding, lower rated corporate bonds have a greater risk of price fluctuations and loss of principal and income than U.S. Treasury bonds and bills. Government securities offer a higher degree of safety and are guaranteed as to the timely payment of principal and interest if held to maturity.

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