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Posts Tagged ‘Fed Chairman’

Talk, Talk, Talk

September 3rd, 2026 by Kurt L. Smith

We have not seen this many articles about Bonds in a very long
time. We have a new Federal Reserve, Chairman Kevin Warsh,
and investors want to know what to expect. I suggest you do
something a little more productive, like enjoy a blowout weekend
to celebrate one of the longest unofficial summer seasons in
recent memory.


Bonds are on their way to becoming a four-letter word, but there
is a long, long way to go. Bond salesman, chiefly the new Federal
Reserve chairman, dealer bank chief economists, and anyone
who manages bonds for a living, will tell you now is a great time to
invest in bonds. Shocking!


The experts used to tell us how great an investment in bonds has
been (performance-wise) along with the compliance tagline “past
performance is no guarantee of future results.” Now that
performance figures are, well, lacking, we are told to “look at that
yield!”


Performance is an important metric, which makes investing in a
bond bear market a very difficult proposition. Of course, this
brings up the issue for some as to whether we are in a bear
market or if we are still a bull market. I remember the 1980s when
double digit interest rates peaked and interest rates fell to 7% in
1986, my first year in bonds. Shortly afterwards in 1987 they
climbed again to double digits. Was it still a bear market in
bonds? No! All of this to say it took some investors almost ten
years to finally figure out we were in a bond (and stock) bull
market.


We are already six-plus years into the new bond bear market.
You are fortunate that you invest in municipal bonds because
municipal bonds may provide opportunities in a bond bear market
that US treasury bonds, corporate bonds, and mortgage may not
provide. The reason is diversity; no other market comes close.


Remember “lower for longer?” I believe a former Federal Reserve
Chairman touted that. Was he prepared for inflation that certainly
would result from a surging money supply response to the COVID
pandemic? Talk about lack of credibility. Yes, do something
productive with your time and celebrate the end of summer or
focus on your stock portfolio.


The market will do what the market will do, but in general, the
market can trend. With interest rates moving up from near zero in
2020, a downward correction in rates from 2023 through early
2026, we are now entering the meat of the trend. It is why interest
rates in the thirty-year bellwether treasury hit post-2007 highs in
yield last month and why the two-year treasury note and ten-year
treasury note closed last week within a couple of basis points of
their twelve-month highs, certainly within striking distance of their
own multi-year highs.


Bonds can be a great tool in your portfolio. But if you do not see
maturity dates on your bonds (or bond products) or those dates
seem to be beyond your comprehension, you might want rethink
your bond portfolio. And if your portfolio includes US treasuries,
corporate bonds, or mortgages, you might want to consider what I
believe to be a worthwhile alternative in municipal bonds (both
tax-free and taxable).


Now may be a good time to review your commitment to the
bonds. Performance figures have been poor and the trend
remains challenging. Let’s talk.


Arlington Independent School District, TX
Unlimited Tax School Building Bonds, Series 2026
Aaa Moody (Permanent School Fund Guarantee) Aa1
(Underlying) AAA S&P (PSF) AA Underlying
Due 2/15 Dated 9/15/26 Maturity 2/15/51
$125,000,000 Sold


Years Maturity Coupon Yield*

1 2027 5.00% 2.61%

2 2028 5.00% 2.67%

3 2029 5.00% 2.77%

4 2030 5.00% 2.89%

5 2031 5.00% 3.00%

6 2032 5.00% 3.08%

7 2033 5.00% 3.23%

8 2034 5.00% 3.35%

9 2035 5.00% 3.47%

10 2036 5.00% 3.58%

11 2037** 5.00% 3.72%

12 2038** 5.00% 3.84%

13 2039** 5.00% 3.93%

14 2040** 5.25% 4.02%

15 2041** 5.25% 4.10%

16 2042** 5.25% 4.16%

17 2043** 5.25% 4.21%

18 2044** 5.25% 4.26%

19 2045** 5.00% 4.37%

20 2046** 5.00% 4.44%

21 2047** 5.00% 4.53%

22 2048** 5.00% 4.59%

23 2049** 5.00% 4.63%

24 2050** 5.00% 4.68%

25 2051** 5.00% 4.70%

*Yield to Worst (Call or Maturity) **Callable 2/15/36
Source: Bloomberg
This is an example of a new issue priced the week of 8/24/26.


Provided for illustrative purposes only and is not a
recommendation to buy or sell any specific investment.


This commentary is for informational purposes only and does not
constitute investment advice or a recommendation to buy or sell
any security. Past performance is not indicative of future results.
All investments involve risk, including the possible loss of
principal. Prices, yields and availability subject to change.
Investment return and principal value of fixed income securities
may fluctuate, and bond prices are subject to interest rate risk,
credit risk, and liquidity risk. Index data is provided for illustrative
purposes only.

Far From A Foregone Conclusion

October 31st, 2025 by Kurt L. Smith

Federal Reserve Chairman Jerome Powell opened his remarks following the October 29th quarter point interest rate cut saying: “A further reduction in the policy rate at the December (10th) meeting is not a foregone conclusion, far from it.” I am not a Fed watcher, but I applaud a statement that at least appears to be forceful.

Mr. Powell may be frustrated in my opinion. The Federal Reserve has cut the target interest rate 150 basis points, from 5.50% in September 2024 to this week’s 4%. What does the Federal Reserve have to show for it? When your mandate is to keep inflation low and employment high, I think the Federal Reserve should be frustrated, particularly when your declared inflation goal is 2% and we have not sniffed that level in years.

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More of the Same

January 31st, 2022 by Kurt L. Smith

No, I did not delay writing this letter until we heard from the Federal Reserve on Wednesday afternoon. When was the last time the Fed surprised? Indeed, this Federal Reserve chair, Jerome Powell, is more of the same.

In the mold of the maestro, Alan Greenspan, Powell serves up optimism with the confidence that the Federal Reserve has “our tools and we will use them” to get the job done. Not only does he have the tools, but he also has experience using them. Whereas former Fed chair Bernanke questioned whether he had the authority to act and act boldly, Chair Powell suffers no such hesitation. He has already been there and done that.

Chair Powell has decisions to make. Inflation is the worst in 40 years, interest rates are rising without his involvement and the Federal Reserve balance sheet now stands at $9 trillion ($8.867TR, per Bloomberg). Thankfully everyone is working…everyone that hasn’t retired, quit, or been sidelined by COVID

This past month things are beginning to break down. Our beloved bond market, the one I continue to shoo you away from, continues to deteriorate. One should not own bond mutual funds which has been my stance for almost two years now. Benchmark yields such as the two-year US treasury note or the ten year note have risen substantially, yet Fed Chair Powell continues to wait.

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Streaks End

November 30th, 2021 by Kurt L. Smith

Streaks don’t last forever. This past weekend in college football proved that. The college football playoffs this year will not include Clemson, Ohio State or Oklahoma. Despite all reason, the best talent, and the fact we all love winners, the playoff runs for these schools has ended. Only Alabama’s hope remains. 

Time will tell whether this is but a minor setback for these perennial powerhouses or one of long-lasting stature. I know the differences. I am a (now) long suffering Texas Longhorn fan. 

I also called the end of the bond bull market as March 6, 2000. An almost forty-year winning streak for the bond market is now over, yet many do not share my certitude, even after twenty-one ridiculously long months. 

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We Have Top Men Working On It

February 10th, 2016 by Kurt L. Smith

In late January the Federal Reserve’s Open Market Committee voted to do nothing.  Unfortunately they had to say something and it was that something that reminded me “we have top men working on it.”  Here the top man is a woman, Chairman Janet Yellen.

The Fed’s luster was destined to pale from the days in 2000 when Chairman Alan Greenspan was dubbed Maestro for his deft maneuverings.  Chairman Ben Bernanke was Time Magazine’s Person of the Year in 2009, having saved the world, or at least us, from certain financial ruin.

So from Chairman Yellen we ask “what have you done for us lately?”  Stocks swooned in August but recovered by December only to have the Federal Reserve vote to hike interest rates for the first time in ten years.  Now that stocks have swooned again to begin 2016 we find the Fed to be hesitant in its plans to normalize, I mean raise, short-term interest rates. (more…)

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