After covering a mixed week in the markets for Oct. 16-20, DoubleLine Portfolio Manager Jeff Mayberry and Quantitative Analyst Eric Dhall break down the concept of “term premium,” which measures the extra amount of yield or spread that bond investors require to take on the additional interest rate risk, and why it is suddenly such a hot topic (13:48). Jeff and Eric also discuss the three basic models for calculating term premia, the two models the Federal Reserve prefers to use and why rising/higher term premia matter.
This week’s market rundown (00:47) has Jeff and Eric wondering if this will be another year to forget like 2022. Stocks were mostly down, and the pain continued in the bond market (2:16) – while the 2s10s recession signal continued to de-invert – commodities were up a little (4:54), and Bitcoin climbed 10% (5:39). Over in Macro Land (5:58), the week included prints showing the strength of the consumer and labor market, and the Old Faithful LEI continued to point to recession. Fedspeak (11:29) couldn’t get any louder this week as Fed Chair Jerome H. Powell spoke at the Economic Club of New York Luncheon on Thursday. Jeff and Eric run through his remarks, including the markets’ live reaction during the Q&A segment. Next week (26:54), prints will include the advanced third quarter GDP estimate, with big numbers being bandied about, and the PCE deflator.
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Mr. Mayberry joined DoubleLine in 2009. He is a Portfolio Manager on DoubleLine’s strategic commodity strategy while working in portfolio management and trading for derivatives‐based and multi‐asset strategies. Mr. Mayberry is a Strategist on the Fixed Income Asset Allocation Committee and a contributing member on our Global Asset Allocation and Macro committees. He also co-hosts DoubleLine’s weekly Monday Morning Minutes (Twitter @DLineMinutes, Minutes@Doubleline.com) podcast. Prior to DoubleLine, Mr. Mayberry was a Senior Vice President at TCW for nine years within the Mortgage Group, where he specialized in portfolio and fund monitoring and analytics. He holds a B.S. in Engineering from Harvey Mudd College and an M.S. in Financial Engineering from the Peter F. Drucker Graduate School of Management at Claremont Graduate University.
Mr. Lau joined DoubleLine in 2009. He is a Strategist on the Fixed Income Asset Allocation (FIAA) Committee and a contributing member on the Global Asset Allocation and Macro Committees. Mr. Lau is a Portfolio Manager on DoubleLine’s strategic commodity strategy while working in portfolio management and trading for derivatives-based and multi-asset strategies, including DoubleLine's Shiller Enhanced CAPE®, Shiller Enhanced International CAPE®, Real Estate and Income, and Multi-Asset Trend strategies. He also co-hosts the Sherman Show (Twitter @ShermanShowPod, ShermanShow@Doubleline.com) and Monday Morning Minutes (Twitter @DLineMinutes, Minutes@Doubleline.com) podcasts. Prior to DoubleLine, Mr. Lau was a Vice President at TCW where he worked under Jeffrey Gundlach as a Research Analyst in the Mortgage Group. He holds a B.S. from the University of Wisconsin, Madison and an MBA from the Marshall School of Business at the University of Southern California.