Portfolio durations differ from key rate durations, as even though the durations of two portfolios may match, both portfolios may differ in the maturity profiles of the bonds they comprise, which will result in differing key rate durations.
The New Home Sales report for the month of March 2014 will be released on Wednesday, March 25, 2014, by the U.S. Department of Commerce, Census Bureau.
Although GDP grew at a little under 3.5% in the second half of 2013, up from an average rate of 2% in the past three years, inflation remains at ~1% level, well below the Fed’s long-term target of 2%.
With inflation and inflation expectations remaining benign and far short of the Fed’s target long-term rate of 2%, injecting “massive” amounts of liquidity into the monetary base would compound the Fed’s future problems.
The S&P/Case-Shiller Home Price Index (or HPI) was released on Tuesday, March 25. The 20-city composite HPI recorded a gain of 13.2% year-over-year (not seasonally adjusted).
On a year-over-year basis, the HPI increased 7.4%—marginally down from January’s 7.5% increase. The Pacific region recorded the largest year-on-year increase at 14%.
The interest rate spread between 10-year Treasury securities (IEF) and 30-year conventional mortgages (VMBS) was at historic highs at the end of 2008 and the beginning of 2009
The interest rate spread is the difference between Treasury yields (TLH) and interest rates on mortgages (VMBS). Interest rate spreads tend to widen in times of economic uncertainty.
The predominant factor in determining bond market returns during from January to April 2013 was the U.S. Federal Reserve’s accommodative monetary policy.
Bond markets across the risk spectrum—including Treasuries (TLT) and mortgage-backed security ETFs (MBB)—posted gains in the first four months of 2013.
