Insights

Market Commentary Q1 2024

Introduction Ellington Income Opportunities (EIO) achieved a net performance of +4.26% in the first quarter1. Risk assets steadily marched tighter over the last few months, continuing a trend from October when short-term interest rate expectations hit their peak. The rally in risk assets has been broad-based, with notable appetite for credit exposure across asset classes…

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Market Commentary Q4 2023

Introduction Ellington Income Opportunities (EIO) had a net performance of +4.48% in the fourth quarter and +17.45% year-to-date . Financial markets staged a dramatic turnaround after September’s sell-off. Five-year Treasury yields rallied 76 bps, CDX HY rallied 124 bps, and CDX IG rallied 17 bps. Structured product spreads tightened throughout the quarter alongside the macro…

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Market Commentary Q3 2023

Introduction Ellington Income Opportunity’s (EIO) performance was positive in the third quarter. Structured product spreads were mixed as hawkish central bank posturing and concerns over Treasury supply drove a sharp bear steepening in the yield curve. In Residential Mortgage-Backed Securities (RMBS) credit, spreads widened out modestly at the top of the capital stack. Credit Risk…

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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…

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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 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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