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By Ken Kapner “When financial markets come under pressure, vital functions such as the efficient allocation of capital and price formation become impaired.” BIS Quarterly Review, September 2022 Recently, there have been various signs of stress in the U.S. Treasury market. Coincidentally, there were two recent reports released by regulators…

By Ken Kapner What is “stagflation”? It’s when prices for goods and services are increasing while the economy is not growing. Are we headed towards it? Well, by any measure, inflation is a problem. For example, take a look at the consumer price index (CPI) going back to the early…

By Ken Kapner Introduction Economic fundamentals, supply chain issues, and energy prices have all contributed to interest rates moving higher. The Fed started raising rates in March of this year to combat the rise in inflation. The 10-year US. Treasury started the year around 1.53%, and at this writing is…

By Charles Gates In March of 2020, an anomaly in a relatively obscure part of the U.S. Treasury bond futures market caused a major disruption in that market, which in turn prompted the U.S. Federal Reserve to put forth $5 trillion of liquidity to calm the markets. Yep, that was…

By David Oakes ‘All models are false; some models are useful.’* The COVID-19 pandemic has turned all of us into amateur epidemiologists. We follow obsessively the daily briefings of political leaders and public health experts, track the latest figures on hospital deaths and newly confirmed infections, and search desperately for…

By Merav Ozair, PhD In finance parlance, we often say “Cash is King”. Cash might be a king, but it is a sick and infected king, which infects everyone who touches it, and in severe cases causes death. If only for our health, it’s time to overthrow this king and…

  By Rob McDonough As the Great Financial Crisis (GFC) of 2007-2008 began unfolding, the Federal Reserve initiated several programs intended to mitigate the economic deterioration that was originally rooted in a deterioration in the mortgage credit markets but which had rapidly expanded across the entire global economy. Many of…

By Merav Ozair, PhD There has been a lot of “buzz” about tokenization. Is it just hype? Or should you actually care? First, what is Tokenization? Simply put, in the financial context, tokenization of assets refers to the process of issuing a digital token that runs on a blockchain. This…

Author: Ken Kapner Over the last year, there has been a lot pf press regarding negative yield curves and the ability of an inverted curve to predict a recession. There are other indicators that market practitioners use to foretell a recession, such as the ISM purchasing managers’ report and consumer…

Most everyone who has grown up with Walt Disney classic films will recall the valiant Prince on his noble steed slashing his way through the Forest of Thorns to reach Maleficent’s castle and rescue Sleeping Beauty. While the transition from Libor to SOFR (or more generally from IBORs to Risk…

Author: Ken Kapner Negative convexity is a feature often found in callable bonds and mortgage backed securities. For this blog, the focus will be on agency MBS. Its source is the embedded option that allows for prepayment of principal prior to final maturity. This blog will examine negative convexity, how…

Author: Ken Kapner The Capital Markets are part of the global financial system that brings together investors and borrowers. Technically, the word capital implies a longer term, but the timing of when “short-term” actually becomes “long-term” has become a bit of a gray area. Generally speaking, short-term refers to money…