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Dodd - Frank: Bad To The Bond(holders)

Rich Walls - Friday, June 05, 2015

With the implementation of the 2010 Dodd-Frank Act being enacted, although not completely written, there have been many negative unintended consequences coming to light. The overarching intent of this Act, specifically the Volcker Rule, was to reduce the scope and limit the amount of risk that Systemically Important Financial Institutions (SIFI’s) could take in not only the capital markets in general, but more explicitly in their proprietary trading accounts. The Act details numerous benchmarks that must be met by the SIFI’s in order to remain compliant with various governing bodies, including a significant increase in capital requirements. Over the past few months, and even weeks as discussed in earlier blogs, the enormous moves in both foreign and domestic bond yields have been nothing short of breath-taking. The reasons for these massive swings may be attributed to the unintended consequences of Dodd-Frank. Read More

Flat Week, ENORMOUS Moves

Rich Walls - Friday, May 01, 2015

Despite a relatively unchanged US equity market, this week was anything but flat for key global data points. We saw a massive move in the FX market as the EUR/US Dollar spiked from 1.08 to 1.12, nearly a 4% rise. West Texas Intermediate (WTI) Crude Oil rose from $56 to $60, over a 7% increase, before settling around $59. The German Bund, mentioned in last week’s blog, has had an even more impressive sell-off this week. The yield on the 10y Bund, which had doubled last week, from 0.07% to 0.15%, has more than doubled again this week, from 0.15% to currently 0.357%. Our own US 10y Bond had a dramatic sell-off as well causing a rise in rates from 1.89% to currently 2.12%, an increase of 12%. These tectonic shifts in asset classes are something we actively monitor. Read More

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