Pension funds have lengthy been investing in “secure” company mortgage-backed securities.
However as The Fed does its “tighten up”, we’re seeing company MBS costs falling and period danger rising.
I bear in mind displaying my Fastened-income class at Chicago and George Mason the “MBS doom chart” displaying the perils of The Fed pushing charges so low that the danger of rising charges turns into a significant issue when charges begin to rise. Effectively, right here we’re … after I’ve retired from educating.
Notice the double whammy of Fed charge will increase and the gradual shrinking of The Fed’s steadiness sheet as The Fed withdraws it ample stimulus. However whereas The Fed was overstimulating markets, it was fairly a rush.
However the rush is gone … for the second. However “Feddie Krueger” is ready within the wings to do it another time!