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Mortgage Market Insights: QM Rules and the GSE Patch

By Rene Segura, Market Analysis Manager | Joseph Blute, Market Analysis Manager 20 Feb 2020

Over the past few months, lots of commentary and speculation has been shared around the QM rule changes, the GSE patch, the patch's expiration and how it will all affect mortgage lenders. In this discussion, we will examine how these rules came about, what the expected changes are, and how these changes may affect future mortgage originations.

Topic Industry News

PSN Separately Managed Accounts (SMA) Data, P...

Q4 2019 PSN Top Guns – Markets Cap Off 2019 With a Bang

By Ryan Nauman 19 Feb 2020

A stellar 2019 finished with a bang as the geopolitical risks that dominated headlines and markets for the better part of 2019 diminished during the fourth quarter while economic data remained stable. The S&P 500 index posted a +9.07% return during the quarter as a phase one trade agreement between the U.S. and China provided a boost for global markets and increased investor optimism. Furthermore, the MSCI EAFE index posted an +8.21% return during the quarter as global investors cheered the trade agreement while hoping the easing trade tensions will provide relief to the soft global economy. Despite a 25-basis point interest rate cut by the Federal Reserve (Fed), the improved investor sentiment hurt Treasuries, as the BofA Merrill Lynch US Treasury index returned -0.89% during the quarter.

Topic Industry News

EPFR Fund Flows

Quants Corner - Getting the right balance on commodities exposure

By Vik Srimurthy 19 Feb 2020

It is an article of investible faith that geopolitical and financials crisis, natural disasters and epidemics translate into greater demand for gold and other precious metals. The coronavirus outbreak centered in Wuhan, China certainly fits these criteria and has generated a predictable flight to gold in its various forms. Fund flow data has, over the years, proved useful in confirming surges in demand, measuring the relative strength of that demand and identifying the inflection points that signal a shift in sentiment towards gold (see chart below). But using this information leaves investors making largely qualitative decisions about the optimum exposure to this asset class.  

Topic Industry News

IGM Credit, IGM FX and Rates

China Insight: Credit Bonds Will Play Catch up on More Supportive Measures

By Tim Cheung 18 Feb 2020

The authorities, MOF, PBOC and CBIRC, hosted a joint conference on Feb 7 to provide an update on supportive policies in light of the coronavirus situation. We believe the conference delivered a loosening bias tone as a nimble response to the virus outbreak. Next move following the huge liquidity injection and provision of first batch of special relending funds to more than a dozen of banks is going to be an LPR cut on 20 Feb. We expect a 10bp cut in both 1-year and 5-year LPRs on 20 Feb (chart 1), similar to the magnitude of the latest OMO rate cut. A more sizable cut may mean the policymakers are opting for more aggressive monetary easing to cushion the economic shocks arising from the coronavirus outbreak.      

Topic Industry News

EPFR Fund Flows

Bond Funds see record setting inflows for the second time year-to-date

By Cameron Brandt 14 Feb 2020

Investors showed signs they are learning to live with the Wuhan coronavirus during the second week of February, steering fresh money to most of the fund groups tracked by EPFR. They committed a combined $36 billion to all Equity and Bond Funds -- with Bond Funds setting their second weekly inflow record since the start of the year -- and showed increased appetite for riskier asset classes such as junk bonds, emerging markets equity and debt and alternative assets. Diversified fund groups remained popular with investors going into the second half of February. Global Equity Funds recorded their biggest inflow since 1Q18, Global Bond Funds took in fresh money for the 49th time in the past 52 weeks and Global Emerging Markets Equity (GEM) Equity Funds extended their longest inflow streak since a 19-week run ended in mid-2Q18. Overall, the week ending Feb. 12 saw Bond Funds take in a net $23.6 billion, Equity Funds $12.5 billion, Money Market Funds $9.3 billion, Balanced Funds $638 million and Alternative Funds $277 million. Equity Funds with socially responsible (SRI) or environmental, social and governance (ESG) mandates attracted nearly a third of the headline number for all Equity Funds, and those with a focus in dividend paying stocks posted inflows for the fourth time in the past five weeks and 18th in the past 22.

Topic Industry News

EPFR Fund Flows

Quants Corner - Brexit and UK markets: Picking your moment with the right tools

By Sayad Baronyan 11 Feb 2020

More than two decades have passed since then Prime Minister Margaret Thatcher gave the speech that many view as the catalyst for the UK’s exit from the European Union earlier this year. Speaking in the Belgium city of Bruges, Thatcher spelled out her opposition to further European integration. "We have not successfully rolled back the frontiers of the state in Britain, only to see them re-imposed at a European level, with a European super-state exercising a new dominance from Brussels,” said Thatcher, who had previously supported Britain’s involvement in the European Union. Brexit became a reality on the 31st of January 2020, after three and a half years marked by two general elections, two prime ministers, endless discussions about hard versus soft exits from the EU and the testing of British constitutional norms. How did this noisy saga play out when viewed through the lens of mutual fund flows? And does the fund flow perspective shed light on the investment case – and climate -- for the UK in the years ahead?  

Topic Industry News

IGM Credit, IGM FX and Rates

China Insight: How Does The Coronavirus Outbreak Impact Yield Curves?

By Tim Cheung 11 Feb 2020

With the coronavirus outbreak still evolving, the market signal is clear: less growth and more accommodative policy in China. Further to our forecast given in the previous issue of China Insight that "China will only achieve 4.8-5.3% GDP growth in 2020" because of the disaster, we in the current issue present our view on how the yield curves in China are being impacted. The broadening of the coronavirus outbreak in China, the lockdown of Hubei province and the extension of LNY holiday have already given a hard hit to the manufacturing sector. Due to that, we inevitably will see a fall in PMI indices in Feb and March. At worst, PMI will continue to be under downward pressure over the rest of H1. In our view, some downturn of the manufacturing sector as a result of the disaster is already priced in 5yr IRS, but a drop by 2 to 3 points in PMI from here should still be able to drive IRS much lower to sub-2016 lows. Given the strong correlation between the NBS Manufacturing PMI and 5yr CNY IRS in the past (chart 1), 5yr IRS at 2.55-2.60% appears to have priced a fall in Feb PMI to around 49.0 from January's 50.0. A further decline in PMI to the 48.0 region in March or during the March-April period, in our view, will bring 5yr IRS down further to 2.35-2.45%.      

Topic Industry News

PSN Separately Managed Accounts (SMA) Data, P...

Introducing, PSN Top Guns Model Portfolios

By Ryan Nauman 10 Feb 2020

We are excited to introduce Top Guns Model Portfolios to our quarterly Top Guns rankings and commentary. For those of you not familiar with Top Guns… Top Guns is a quarterly ranking of the best of the best Separately Managed Account (SMA) managers in the PSN SMA database, our proprietary SMA database. We rank the managers across various metrics such as return, risk, r-squared, and information ratio to determine the Top Gun award recipients as well as naming Manager of the Decade. These rankings help wealth managers who subscribe to the PSN SMA database more efficiently identify the top managers for consideration in their client portfolios. In turn, this also helps highlight our asset manager participants who are outperforming their relative benchmarks.

Topic Industry News