Tag Archives: bond

Is the Bond Market Ready to Crash?

The media hype is for a sharp sell off in the bond market. Some “gloom and doom” pundits are even predicting a crash that will plummet the world into a worldwide depression. The US Federal Reserve has ended its $4.5 trillion bond purchase program. Fed Chairperson, Janet Yellen, has maintained a “stead as she goes” policy without a definitive time frame for raising rates. This has left analysts in a state of suspended animation.Continue Reading

The Detroit Bankruptcy Case – Municipal Bondholders Take Note

For the past 16 months the city of Detroit has gone through a gut-wrenching series of negotiations to settle the largest bankruptcy in US history. Detroit has a population of 680,000 and a land mass larger than Manhattan, Boston and San Francisco combined.Continue Reading

Investors-Urgent Start Following the Giant Bond Bubble

During the last few weeks we saw the stock market gyrate with wild swings up and down. Investors started thinking “crash” mode. In times of crisis we need a clear head and logical thinking. First, let’s look at who is doing the buying and selling. The US Federal Reserve gave the big banks 4 trillion to play with when they set in motion their bond- buying program. It lasted from 2009 through 2013 and will end this year. (When the Fed buys bonds it credits banks’ balance sheets.) The banks used this money to rally the stock market to new all time highs. So, this was a ‘big boys” rally. Individual investors have been largely absent in this bull- run. The selling and buying that occurred was largely driven banks and hedge funds.Continue Reading

The Words Federal Reserve Chairman Bernanke Said That Turned The Markets Into a Tailspin

Bonds, bonds, bonds. It’s all about bonds. For those of you who don’t invest in bonds, they function in a special way. When the yield (interest paid) on bonds goes down the price of the bond goes up. When the crash of 2008-09 occurred, seven trillion of wealth disappeared almost overnight. The US Federal Reserve is like the bank of last resort and functions like a central bank in other countries. There were no more options open to stop the bleeding from the crash. The only answer was to pump money back into the economy and quickly. The way to do this was for the Federal Reserve to buy bonds and mortgage- backed securities from the banks and mortgage companies. The two largest holders of mortgages are Fannie Mae and Freddie Mac. They hold about 80% of all US mortgages.Continue Reading