No. of Recommendations: 1
Hi guys,

Interesting article: http://seekingalpha.com/article/47801-the-rate-cut-s-impact-on-fixed-income?source=d_email

A low risk way to play this is in the agency MBS market. MBS are basically short calls on long-term rates. In other words, MBS are kind of like the old covered call strategy, which tends to work best when the market is mildly negative. Besides, agency MBS are likely to benefit greatly from improving liquidity. I wouldn't touch non-agency MBS period.

You might be able to play in TIPs here too. I'd think TIPs would catch a bid here, as inflation worries rise. Unfortunately, I think the problem in TIPs is oil. Since TIPs are based on total CPI, its possible that core inflation rises because the Fed is supplying too much money, and yet oil prices come off their all-time highs, resulting in total CPI which isn't any higher. So I'd avoid TIPs, especially if you are a long-term investor.


rk
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