March, 2008 ... "Asset / Liability Watch" ... March, 2008 ... "Bond Market Watch" ...
"Year-to-date Liability growth exceeded asset growth by 9.03% through March. The Liability return (Treasury valuation) rose 3.62%, while overall weighted average assets dropped –5.41%" ... "In spite of 225 basis points of cuts in the Fed Funds rate since last September, the overall market liquidity is worse than ever. The failure of the liquidity injection via lowering the Fed Funds rate and providing financing arrangements has forced the Fed to enact Plan “B” to help re-liquify the fixed income markets." ... "This drop in assets resulted from: a small 1.01% rise in the Cash index; a 2.17% rise in the Lehman Aggregate index, which represents investment grade fixed income; a –8.83% decline in international equity markets, as measured by the MSCI EAFE index; and a –9.45% drop in the domestic equity market S&P." ... "The market’s reaction to the Fed’s action so far is to force near-record-high MBS spreads, corporate spreads, implied levels of volatility, and swap spreads. The Fed only began instituting a set of 28-day system repo operations at the beginning of March. The Fed only increased the size of its biweekly TAF (Term Auction Facility) program to a total of $100 billion after weeks of seeing demand consistently in the range of $55 billion to $68 billion for each liquidity auction." ...
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