Bonds: Total Market

In an article for Benzinga, Piero Cingari discussed the bear market in office REIT stocks as the vast majority are now trading at their all-time lows. It’s not entirely surprising given that workers are not returning to the office, following the pandemic, despite the best efforts of many employers. 

As a result, many companies are giving up office space and/or choosing to move to a hybrid model. Of course, this has spillover effects on other areas such as the businesses that sell products and services to these workers. 

In the first week of May, office occupancy in the 10 largest US cities was at half the levels that were seen prior to the pandemic. Many analysts had predicted that office occupancy would gradually ‘normalize’ just like so many other parts of the economy have done so. Yet, this isn’t the case and occupancy hasn’t risen over the last 6 months which is an indication that the changes may be permanent. 

Adding to the sectors’ woes is higher rates leading to higher borrowing costs, heavy levels of short interest, and rising crime rates in many urban areas. 


Finsum: Office REITs have been crushed amid high rates and corporations reducing office space with occupancy at 50% of pre-pandemic levels.

 

In an article for MarketWatch, Mike Murphy covered a recent report that state and federal regulators are examining unusual trading patterns behind the recent volatility in bank stocks. Notably, the entire banking sector and specifically regional banks, have been subject to heightened volatility and heavy short-selling in recent months following the failures of banks like Signature Bank, First Republic, and Silicon Valley Bank.

In recent weeks, there have been big declines and large amounts of put buying in the stocks of regional banks like PacWest, Western Alliance, and Zions. The core challenge for these banks is that they made long-term loans at much lower rates, yet they have to increase short-term deposit rates or risk depositors leaving for higher rates elsewhere. And the risk of this deposit flight increases if concerns about a bank’s financial health increases.

Both the White House and the SEC noted the short-selling pressure on banks possibly contributing to the volatility. In a statement, SEC Chair Gary Gensler said, “In times of increased volatility and uncertainty, the SEC is particularly focused on identifying and prosecuting any form of misconduct that might threaten investors, capital formation or the markets more broadly.”


Finsum: With increasing volatility in the banking sector, regulators and public officials are examining short-selling and put buying as factors that may be adding to volatility.

 

Um, fixed income investors seemingly were more than glad to host the going away party, according to JP Morgan.com.

That’s especially in the aftermath of one of the worse years on records for bonds. The culprit? Yep; the Fed, and its hyper active barrage of rate hikes. And, yes again, the last of it should spell stability this year to the bond market. That said, investor should bear in mind:

How far will the Fed go before concluding its rate hiking campaign?

How might credit perform in a year where both economic and profit growth are set to slow?

How will impaired liquidity impact price action?

Now, on one hand, of course, with volatility comes risk. But it also can be the land of opportunity, according to lazardassetmanagement.com. Consequently, investors shouldn’t duck and dodge fixed income like a bill collector but embrace the possible upside by going eye to eye and confronting volatility.  

“In this unusual environment, we believe investors may want to move out of a passive mindset and consider investments beyond ‘plain vanilla’ bonds. By being creative, being active, and diversifying globally, investors can find fixed income solutions that may set up portfolios for the longer term with attractive return potential.”

Page 9 of 32

Contact Us

Newsletter

Subscribe

Subscribe to our daily newsletter

Top
We use cookies to improve our website. By continuing to use this website, you are giving consent to cookies being used. More details…