Financials

The ten-year bond yield fell by 8 basis points to 1.51% for the week ending August 12, 2016. Ginnie Mae TBAs rose by 4 ticks and closed at 104 28/32.

Bank of America (BAC) is better positioned to gain from an interest rate hike than JPMorgan Chase (JPM). It’s more sensitive to interest rate changes.

Microsoft (MSFT) issued Aaa/AAA rated high-grade bonds worth $19.8 billion through seven parts on August 1, 2016.

Lately, mortgage rates and bond yields have shown a weak correlation. Treasury yields have fallen in the past month, while mortgage rates have been steady.

Annaly positioned itself to reduce its interest rate risk and increase its credit risk. Since 2009, global bond markets have risen in value by about $17 trillion.

Analysts have increased their short-term iron ore price forecasts due to stronger-than-expected temporary factors.

Home prices in the Pacific and Mountain states have outperformed prices in the rest of the country over the past two years.

Lately, mortgage rates and bond yields have shown a weak correlation. Treasury yields have fallen over the past month, while mortgage rates have been steady.

Housing starts and building permits came in around 1.2 million—towards the top end of a narrow range over the past year.

The Harbor Capital Appreciation Fund Investor Class has tanked by 3.5% YTD in 2016, making it the second-worst performer YTD among our 12 funds.

Fallen angel bonds—high-yield bonds originally issued with investment grade credit ratings—are generally known for offering potential value. A big source of this value has been the tendency of fallen angels to be oversold below what may be considered fair value, leading to a downgrade to high yield. A less obvious source of value for fallen angels […]

PNC Financial’s non-interest income for 2Q16 increased by 10% over the previous quarter, mainly due to higher fee income growth.

There are two basic types of state foreclosure laws—judicial and non-judicial. In non-judicial states, foreclosures are handled through a streamlined process.

Wells Fargo (WFC) is the largest mortgage lender in the US, operating primarily as a retail and commercial bank. It is been the most profitable bank in its peer group, posting a return of 10% on shareholder’s equity and ~1.3% on assets in 2015.

Wells Fargo (WFC) has been considered the strongest and most steady among the “too big to fail” banks in the United States for years.

A bank’s growth can be limited if it doesn’t have enough regulatory capital. If the bank doesn’t have enough capital, it will be forced to dilute its equity to raise capital.

“Strategy” can be defined in many ways. Generally, strategy is a long-term plan. There are two main aspects to strategy—operational level strategy and human resource level strategy.

The bank’s strategy is to not focus on any particular segment of industry. This helps it mitigate risk because the bank’s earnings and delinquencies are not dependent on any particular sector.

Short-term wholesale funding refers to a bank’s use of short-term deposits from other financial intermediaries—like pension funds and money market mutual funds. It uses the short-term deposits to invest in longer-term assets—like loans to businesses. Using these short-term funds to invest in longer-term assets causes a timing mismatch between assets and liabilities.

Basel III addresses most of Basel II and II.5’s deficiencies. But it still has some shortcomings. Firstly, the increased regulatory capital required under Basel III will increase barriers to enter into the sector.

Basel II.5 was essentially a revision of Basel II norms, as the existing norms often failed to correctly address the market risks that banks took on their trading books. Basel II.5’s main aim was to strengthen the capital base, and so the banks’ ability to withstand risk, by increasing banks’ capital requirements.

Although Basel I brought a worldwide standard in regulations, introduced the risk-weighted assets concept, and segregated capital, it had a few deficiencies.

The second most important technical parameter used in banking regulations is risk-weighted assets (or RWA). If you’ve seen bank financial statements, then you might have noticed the “RWA” term there.

Capital is important because it’s that part of an asset which can be used to repay its depositors, customers, and other claimants in case the bank doesn’t have enough liquidity due to losses it suffered in its operations.

The most important types of banking capital are common stock (or shareholders’ equity), preferred stock (or preferred equity), revaluation reserve, general provision, and hybrid instrument.

Banking regulations aim to ensure that the risks are minimized. If any unforeseen event occurs, then the interests of bank customers are protected. On a wider scale, the regulations also seek to absorb and minimize shock in the economy.

We stated earlier that most banks are highly leveraged financial risk-takers. When things go awry, the results can be catastrophic, leading to huge losses or even to a bank closure.

Banking risk can be defined as exposure to the uncertainty of outcome. It’s applicable to full-service banks like JPMorgan (JPM), traditional banks like Wells Fargo (WFC), investment banks like Goldman Sachs (GS) and Morgan Stanley (MS), or any other financials included in an ETF like the Financial Select Sector SPDR Fund (XLF).

Whenever we analyze any banking company, we’re looking at two main variables—the return a bank earns and the amount of risk. To understand any bank, you need to understand these two parameters well.

Custodian banks like a warehouse and store other financial institutions’ and individuals’ assets—they help in keeping financial instruments safe.

Brunswick is a leading global designer, manufacturer, and marketer of recreation products including marine engines, boats, fitness equipment, and bowling and billiards equipment.

Millennium Management increased its stake in renewable energy generator NextEra Energy Inc. (NEE) from 1,789,954 shares to 3,333,627 shares.

While last week was a huge one for the builders, we still have a lot of important data this week, with the Case-Shiller Real Estate Index, New Home Sales, as well as the Personal Spending and Income data.

Millennium Management started a new position in SunTrust Banks (STI) that accounts for 0.15% of the fund’s portfolio.

Examining credit spreads gives investors an idea of how cheap (a wide credit spread) or expensive (a narrow credit spread) the market for a particular bond category or a particular bond is.

Chilton liquidated its position in CarMax Inc. (KMX) in the fourth quarter that had accounted for 0.71% of the fund’s third quarter portfolio.

The Fed directly influences the short-term yields by either buying or selling short-term Treasuries or affecting the Fed funds rate.

Appaloosa Management initiated a 0.63% position in oilfield service company Halliburton (HAL) last quarter.

Soros sold its 1.20% position in Johnson & Johnson (JNJ) last quarter. Johnson & Johnson’s reported 37% increase in adjusted net earnings in 4Q was mainly driven by its pharmaceutical segment.