Summary of Anthony Crescenzi's The Strategic Bond Investor, Third Edition

By IRB Media

Please note: This is a companion version & not the original book. Book Preview:

#1 The bond market has had a profound impact on global economic activity, national standards of living, asset prices, and the political landscape. The market is inherently vulnerable to any type of stress, and its effects are still felt today.

#2 The bond market affects the global economy, financial markets, and people’s lives. I will show you how to unlock the power of the bond market by investing in bonds or by gaining a greater understanding of how the bond market’s behavior could be impacting your life.

#3 The bond market is the dog that wags the tail. The bond market and, more specifically, the interest rate levels and credit conditions that are affected by the bond market significantly influence the performance of the financial markets and the economy.

#4 The bond market is where interest rates are set. The interest rate levels quoted on a myriad of loans, credit cards, savings accounts, money market funds, and the like are all linked to the bond market.

• Language: English
• Publisher: IRB Media
• Release date: May 20, 2022
• ISBN: 9798822522763

IRB Media

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Insights on Anthony Crescenzi's The Strategic Bond Investor, Third Edition

Contents

Insights from Chapter 1

Insights from Chapter 2

Insights from Chapter 3

Insights from Chapter 4

Insights from Chapter 5

Insights from Chapter 6

Insights from Chapter 7

Insights from Chapter 8

Insights from Chapter 9

Insights from Chapter 10

Insights from Chapter 11

Insights from Chapter 12

Insights from Chapter 13

Insights from Chapter 14

Insights from Chapter 15

Insights from Chapter 16

Insights from Chapter 17

Insights from Chapter 1

#1

The bond market has had a profound impact on global economic activity, national standards of living, asset prices, and the political landscape. The market is inherently vulnerable to any type of stress, and its effects are still felt today.

#2

The bond market affects the global economy, financial markets, and people’s lives. I will show you how to unlock the power of the bond market by investing in bonds or by gaining a greater understanding of how the bond market’s behavior could be impacting your life.

#3

The bond market is the dog that wags the tail. The bond market and, more specifically, the interest rate levels and credit conditions that are affected by the bond market significantly influence the performance of the financial markets and the economy.

#4

The bond market is where interest rates are set. The interest rate levels quoted on a myriad of loans, credit cards, savings accounts, money market funds, and the like are all linked to the bond market.

#5

The bond market is a reference point for where interest rates should be, and the Federal Reserve sets interest rate levels that are reflected in the bond market. The Federal Reserve’s impact on market interest rates has increased because it has become an active buyer of securities.

#6

The explosion in consumer debt in recent decades was a cultural phenomenon, influenced by the factors mentioned above as well as demographics. The baby boomers, those born from 1946 to 1964, increased their use of debt to finance their love for consuming goods and services.

#7

The biggest way in which interest rates affect a household’s finances is through mortgage rates. The mortgage rate affects every mortgage holder’s monthly financial situation.

#8

I have learned to respect the Fed, and I have learned to be opportunistic with interest rates when they fall. I am also patient when interest rates rise, because I believe that they will stay under downward pressure for some time due to demographic influences.

#9

Interest rates have a large impact on the payments that most people make on their credit card balances. Some have obtained new credit cards with low introductory interest rate levels, which has been partly responsible for the sharp increase in consumer debt in recent decades.

#10

Interest rates can affect your personal finances in many ways, not just your debts. They can affect your equity portfolio, as well as other assets you own in the public and private markets.

#11

The bond market and the central bank’s involvement in it affects the stock market, and vice versa. When the bond market flutters, the stock market quakes, and when the music starts playing again, everyone wants to dance.

#12

The 2008 financial crisis was caused by a multitude of factors, some of which date back decades. The main cause was the use of debt excessively as a means of financing consumption. The bond market enabled it all by acting as the main conduit for borrowers to finance their profligacy.

#13

The bond market plays a big role in financial crises, as it was in 1998 when the Fed responded to the Asian financial crisis by lowering interest rates. The rate cuts helped restore investor confidence, but they also sowed the seeds for one of the most explosive and harrowing periods in economic and financial history.

#14

The Fed continued raising interest rates until May 16, 2000, when it increased the size of the rate hikes from a quarter of a percentage point at a time to a half point. The Fed probably did this to ensure that the stock market, which had begun to slip, would stay down for the count and tighten financial conditions to prevent a further acceleration in inflation.

#15

The Federal Reserve responded to the financial crisis of 2001 by aggressively lowering interest rates, which helped boost key interest-sensitive sectors of the economy. In addition, the rate cuts helped to lift mortgage refinancing activity, which reduced mortgage payments for millions of households.

#16

The bond market played a role in the coronavirus crisis as well. When investors collectively decided to derisk, there were few intermediaries willing or able to transfer the risk, so it became a game of hot potato.

#17

Asset diversification does not equal risk diversification. While it is true that different assets have different risks, there are still common risks that affect each asset. For example, the credit spread of a corporate bond is influenced by its enterprise value, its debt/EV ratio, and its credit beta.

#18

The goal is to reduce the correlation between the portfolio and the equity market. This means that in addition to interest rate risk and equity risk, investors must look for other commonalities such as currency risks, liquidity risks, and volatility risks.

#19

The primary way in which the bond market affects the economy is through interest rates, which are the price of borrowing money. They generally rise or fall depending on the actions taken by the Federal Reserve to regulate the health of the economy.

#20

There are three interest rate-sensitive sectors of the American economy: housing, automobiles, and capital spending. The impact