Market 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…

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Market 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,…

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Market Commentary Q1 2022

Introduction  Ellington Income Opportunities (EIO) suffered in the first quarter with strong headwinds from interest rate and credit spread volatility. Rates sold off throughout the quarter as the market priced in a more aggressive Fed hiking cycle. The yield curve bear-flattened with 2-year Treasury rates up 160 basis points (bps) while 10-year rates were up…

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Market Commentary Q4 2021

Introduction Ellington Income Opportunities (EIO) maintained steady performance in the fourth quarter amidst elevated volatility across financial markets. In interest rate markets, the yield curve flattened throughout the fourth quarter as the Federal Reserve admitted they may have understated the likely persistence of inflation and eventually accelerated the taper schedule. Credit markets were briefly battered…

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The Cycle Repeats: Post Crisis Opportunities in Structured Credit

 Key Takeaways:  While the March 2020 shock affected all financial markets, structured products, which traditionally experience relatively low volatility in benign markets and relatively high volatility in stressed markets, were especially adversely impacted and trailing performance metrics remain depressed. Spreads on liquid credit indices have since recovered to post-financial crisis tights. Nevertheless, in structured products,…

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Market 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…

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Income 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…

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Opportunity 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…

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Tariffs: 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…

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Student 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,…

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