Posts by buffalobuilt
Market Commentary Q2 2023
Introduction Ellington Income Opportunities (EIO) performance was positive in the second quarter despite broader market volatility. During the quarter, regional bank instability as well as a potential United States default dominated headlines. Immediate concern over both risks subsided by quarter-end, boosting risk appetite, even as interest rates were driven higher by hawkish Fed sentiment. The…
Read MoreMarket Commentary Q3 2022
Introduction Ellington Income Opportunities (EIO) performance was relatively flat in the third quarter with volatile market conditions persisting. After rallying in late July and the beginning of August, interest rates and credit spreads sold off as investors priced in hawkish central bank developments. Credit spreads, as measured by the corporate high yield index, tightened over…
Read MoreMarket Commentary Q2 2022
Introduction Ellington Income Opportunities (EIO) generated negative performance in the second quarter with extreme volatility across capital markets. From interest rates to credit, a large repricing of risk has occurred across markets as the prospect of a less supportive Federal Reserve and potential for a recessionary environment quickly shifted market attitudes towards defensive posture. Intra-quarter,…
Read MoreMarket Commentary Q3 2021
Introduction The early months of the third quarter were characterized by slower trading volumes after nearly 18 months of frenzied activity post-March 2020. However, trading activity picked up as summer came to a close and volatility returned to the markets. The yield on the 10-year U.S. Treasury note closed nearly 18 basis points (bps) higher…
Read MoreIncome Opportunities in Rising Rate Environments
Introduction The most recent round of quantitative easing has flooded the fixed income markets with cash, pushing the most commoditized sectors of the bond market to historically low yields and tight spreads. Bond investors with allocations to corporate-focused funds have experienced very strong returns over the past twelve months which may come at the expense…
Read MoreOpportunity Zones: Potential Impacts on Structured Credit Markets
The Tax Cuts and Jobs Act of 2017 (the “Act”), perhaps the biggest legislative victory of the Trump Administration to date, re-wrote much of the country’s tax code, lowering both individual and corporate tax rates while amending various deductions for the first time in over thirty years. Initially, media and public attention were largely focused…
Read MoreTariffs: Understanding the Effects on the U.S. Housing Market and Structured Credit
Tariffs and trade embargos have been a key piece of U.S. foreign policy for much of our history. From the nation’s founding through the early part of the 20th century, tariffs were regularly imposed to protect U.S. economic interests. While protectionist policies took a step back in the post-World War II era, they have come…
Read MoreStudent Loan Debt: Impacts on the U.S. Housing and Structured Credit Markets
At $1.52 trillion outstanding, student loan debt is now the second largest form of consumer debt in the United States, behind only residential mortgages. This growth has been particularly pronounced among young borrowers. Between 2005 and 2014, average real student loan debt per capita for individuals aged 24 to 32 doubled from $5,000 to $10,000,…
Read MoreFalling Rates: Impacts on the Structured Credit Markets
As the U.S. economy continued to strengthen in 2018, the Federal Reserve raised its benchmark interest rate four times. With the market pricing in additional future hikes, interest rates rose throughout the year, culminating with the 10-year U.S. Treasury yield reaching 3.24% in November, a level not seen in over seven years. The steady march…
Read MoreAuto Lending: What to Make of the Recent Increase in Delinquencies?
In the years immediately following the 2008 financial crisis, the availability of consumer credit tightened dramatically. As a result, the personal balance sheet of the average American improved as consumers were forced to de-lever in the absence of financing options. However, while mortgage credit issuance, the largest form of consumer credit, came to a virtual…
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