Not much has changed in the last few weeks for the markets. Economic data is mixed in the U.S., and concerns still exist about global economic conditions. Most market commentary centers on monetary policy and the impact of low or negative interest rates.
With this as the background, it has been interesting to see the increase in U.S. 3-month LIBOR over the last month. Since June 24, the rate has increased from 0.62% to 0.82%. The last time LIBOR increased this much was right before the Federal Reserve (Fed) increased interest rates in November/December of last year. So, is the Fed going to increase rates in September, or is something else going on?
It is interesting to me that LIBOR has been rising ever since the Brexit vote on June 23. One explanation is that, due to the change in money market fund rules, money has been flowing out of prime funds into government funds and, as a result, putting pressure on banks to secure short-term funding.
I will be watching 3-month LIBOR over the next few weeks to see if the increase has broader implications for the market and economy.
This blog post is for informational use only. The views expressed are those of the author, Dave O’Malley, and do not necessarily reflect the views of Penn Mutual Asset Management. This material is not intended to be relied upon as a forecast, research or investment advice, and it is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.
Any statements about financial and company performance of The Penn Mutual Life Insurance Company or its insurance subsidiaries (each, “Client”) made by the author is provided with a written consent from the Client. Penn Mutual Asset Management is a wholly owned subsidiary of The Penn Mutual Life Insurance Company.
Opinions and statements of financial market trends that are based on current market conditions constitute judgment of the author and are subject to change without notice. The information and opinions contained in this material are derived from sources deemed to be reliable but should not be assumed to be accurate or complete. Statements that reflect projections or expectations of future financial or economic performance of the markets may be considered forward-looking statements. Actual results may differ significantly. Any forecasts contained in this material are based on various estimates and assumptions, and there can be no assurance that such estimates or assumptions will prove accurate.
Investing involves risk, including possible loss of principal. Past performance is no guarantee of future results. All information referenced in preparation of this material has been obtained from sources believed to be reliable, but accuracy and completeness are not guaranteed. There is no representation or warranty as to the accuracy of the information and Penn Mutual Asset Management shall have no liability for decisions based upon such information.
High-Yield bonds are subject to greater fluctuations in value and risk of loss of income and principal. Investing in higher yielding, lower rated corporate bonds have a greater risk of price fluctuations and loss of principal and income than U.S. Treasury bonds and bills. Government securities offer a higher degree of safety and are guaranteed as to the timely payment of principal and interest if held to maturity.
All trademarks are the property of their respective owners. This material may not be reproduced in whole or in part in any form, or referred to in any other publication, without express written permission.