The poor housing environment
continues to haunt the mortgage
market. Structured investment
vehicles (SIVs) and Collaterized Debt
Obligations (CDOs) have been losing
value at an alarming rate.
A consumer pullback or world turmoil
would favor investing in Treasury
bonds. We would look for stronger
returns earlier in the year.
It is too
early to buy lower quality bonds
even though spreads have widened.
Agency, corporate and mortgage bond
spreads widened even further in the
last recession.
The weak dollar and high commodity
prices will tend to prop up Treasury-
Inflation Protected Securities (TIPS).
Municipal bonds are trading at or
above the rates on taxable bonds.
This anomaly presents a great buying
opportunity for High Quality, General
Obligation bonds.
We expect volatility in rates and
excellent research will be needed to
identify the best opportunities.
