U. S. credit markets remain dominated by the same two uncertainties that have persisted for months. While some immediate sense of pressure has subsided from the Eurozone’s fiscal quagmire, reservations about a credible long term solution continues to drive safe harbor investors into the U. S. Treasury market. Concurrently, signs of a domestic economic recovery are building, and a continuation of positive data will inevitably turn further investment interest away from extremely anemic bond yields toward alternative prospects. In fact, we believe if it were not for the European debt crisis, U. S. nominal interest rates would probably be higher by fifty to seventy-five basis points (0.50 – 0.75%).
On the other hand, the corporate bond market began the new year in a most promising fashion, and we envision a favorable period ahead for both investment grade and high yield sectors. Since the Federal Reserve Board policymakers have committed to maintaining a zero short-term rate policy for an extended period of time, through 2014, the additional coupon yield available on corporate issues may prove quite beneficial over a range bound rate environment. Moreover, strong corporate balance sheets may foster a slight tightening of credit spreads over the course of the coming year. Even within the financial sector, which has suffered the most from exposure to Eurozone complications, several issuers appear positioned to soon offer significant opportunities. We are monitoring developments in stronger regional banking, life insurance, and financial services companies.
Submitted by: Howard Potter – Senior Fixed Income Portfolio Manager
This information is intended solely to report on investment strategies and opportunities identified by Roosevelt. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. This material is not intended as an offer or solicitation to buy, hold or sell any financial instrument. References to specific securities and their issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. Please contact us at 646-452-6700 if there is any change in your financial situation, needs, goals or objectives, or if you wish to initiate any restrictions on the management of the account or modify existing restrictions, or if you would like to request a copy of our Code of Ethics. Our current disclosure statement is set forth on our Form ADV Part II, available for your review upon request, and on our website, www.rooseveltinvestments.com.
