Inside the Fed’s Balance Sheet (The Biggest in the World)
The Fed has started the rate normalization process only recently and has a long way to go before the rates come back to pre-Lehman-collapse levels.
VanEck BUTCHER: What should investors be looking for in 2017? VAN ECK: A key question is whether Congress will fix the U.S.’s long-term debt problem. If it doesn’t, our entitlement…
VanEck BUTCHER: How do you expect the Trump administration to affect your outlook? VAN ECK: As an investor, you have to filter out a lot of the noise and just…
Lending Practices Are Beginning to Signal a Credit Cycle Shift
Another cycle that is closely related to the business cycle is the credit cycle, the expansion and contraction of access to credit in an economy.
According to data from S&P Capital IQ LCD, the US leveraged loans market saw an allocation of $31.9 billion worth of senior loans in October 2015. This was 163.2% higher than the $12.1 billion priced in September 2015.
According to data from Lipper, leveraged loan funds saw outflows worth $753.6 million in October until the week ending October 28. This is compared to net outflows of $2.1 billion in September.
Could Lower Tax Rates Affect Municipal Bonds Negatively?
For investors in the top tax bracket, municipal bond (XMPT) yields on a tax-equivalent basis are roughly 5.0%.
Municipal bond issuance has been rising over the last few years. More refundings would cause the supply to rise further.
Municipal bonds were the worst-performing bond class in 2016 after solid returns in 2014 and 2015, and high-yield bonds (JNK) outperformed.
The Fed’s Monetary Policy: How Long Can the Hawks Fly?
Before Trump, markets had been gripped with anxiety whenever the US FOMC was approaching a decision about hiking the interest rate.
Markets will be monitoring any comments from the Fed going forward, and every future meeting will likely be lively in terms of the possibility of another rate hike.
The minutes from the FOMC meeting on March 14 and 15 were reported on April 5 and revealed the tone of the conversation among members to be hawkish.