Podcasts & Videos

Traditional Ways to Manage Interest Rate Risk

October 9, 2014
Traditional approaches to rising rates are facing new challenges. What are they and what are your alternatives? Find out in our podcast.

Recorded September 25, 2014.

Past performance is not indicative of future results. You cannot invest directly in an index.

Interest rate data: Bureau of Labor Statistics, as of 9/17/14.

Retail inflow data: Bloomberg, as of 8/31/14.

Coupon: The annual interest rate stated on a bond when it's issued. The coupon is typically paid semiannually. This is also referred to as the "coupon rate" or "coupon percent rate."

Basis point: 1/100th of 1 percent.

Floating Rate Security: A debt instrument with a variable interest rate usually tied to a benchmark rate such as the US Treasury Bill Rate or the London Interbank Offered Rate.

"ETFs": Exchange-traded funds

Liquidity: The degree to which an asset or security can be bought or sold in the market without affecting the asset’s price. Liquidity is characterized by a high level of trading activity. Assets that can be easily bought or sold are known as liquid assets.

"Fed": Federal Reserve

Tapering: A shift in monetary policy by which the Federal Reserve would begin decreasing the amount of bonds it purchases.

Tightening: Refers to the Federal Reserve enacting monetary policies that have the overall impact of reducing the availability of credit, which is widely thought to have the potential to slow economic growth.

Yield curve: Graphical Depiction of interest rates on government bonds, with the current yield on the vertical axis and the years to maturity on the horizontal axis.

Federal Funds Rate: the rate that banks that are members of the Federal Reserve system charge on overnight loans to one another. The Federal Open Market Committee sets this rate. Also referred to as the "policy rate" of the U.S. Federal Reserve.

Federal Funds Rate Data: Bloomberg.

Duration: A measure of a bond’s sensitivity to changes in interest rates. The weighted average accounts for the various durations of the bonds purchased as well as the proportion of the total government bond portfolio that they make up.

Hedge: Apply strategies meant to mitigate the impact of currency movements on equity returns.

Futures/Futures Contract: Reflects the expected future value of a commodity, currency or Treasury security.

Barclays U.S. Aggregate Index: Represents the investment-grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, as well as mortgage and asset backed securities.

Active manager: Portfolio managers who run funds that attempt to outperform the market by selecting those securities they believe to be the best.

 

 

krom
Bradley Krom
Director, Research
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siracusanoiii
Luciano Siracusano III
Chief Investment Strategist
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