Box Spreads: An Alternative to Treasury Bills?
Box spreads represent an opportunity to borrow and lend via the options market, at similar (and often better) rates than those that are available in the treasury bill market.
Box spreads represent an opportunity to borrow and lend via the options market, at similar (and often better) rates than those that are available in the treasury bill market.
As the chief research officer of Buckingham Strategic Partners, the issue I am being asked to address most often is about fixed income strategies when yields are at historically low levels and inflation risk is heightened due to the unprecedented increase in money creation (through quantitative easing), the extraordinary expansionary fiscal spending around the globe, and the war in Ukraine driving prices higher (especially for food and energy). As always, to answer the question we turn first to the academic evidence on which investments in general provide the best hedges against inflation.
The reported results we covered have important implications for investors in terms of portfolio construction, risk monitoring, and manager selection. Because these common factors explain almost all the returns of bond portfolios, investors should construct their bond portfolios using low-cost, passively (systematically) managed funds with these factors in mind and then carefully monitor their exposure to these systematic risks.
My August 17, 2020, article for Advisor Perspectives, “Factor-Based Investing Beats Active Management for Bonds,” provided the evidence from a series of academic papers on the ability of common factors to explain the variation of [...]
Part 2: From understanding factors to solving investor problems In Part 1, we defined fixed income factors. But factors alone will not solve each investor’s problem. Below, we extend the discussion by walking through a [...]
Figure 1: Investors are between a rock and a hard place.Source: Getty Images. Invesco. Investors are stuck between a rock and a hard place. On one hand, it is painful to buy bonds that deliver [...]
The Returns to Private Debt: Primary Issuances vs. Secondary Acquisitions Douglas Cumming, Grant Fleming, and Zhangxin (Frank) Liu Financial Analysts JournalA version of this paper can be found hereWant to read our summaries of academic finance [...]
In mid-February, prior to the market craziness, Jon Seed posted an article on our site titled: “Price”, ETFs, and Bond Market Liquidity. This was a prescient article, as it highlighted some of the issues with [...]
Last week, there were some pretty big dislocations between bond mutual funds and ETFs. I picked one specific example I found interesting, comparing the Vanguard high-yield muni bond mutual fund to two high-yield muni bond [...]
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