Fed Shift from "Put" to "Collar" Bodes Well for Spread Product
In this paper, Robert Tipp, CFA, Chief Investment Strategist and Head of Global Bonds discusses the Federal Reserve's implicit adoption of a “market-collar” approach, becoming more accommodative when markets become too risk averse (the well-recognized “Fed put”) and removing accommodation if markets become too ebullient (the “Fed cap”). The result of the Fed's "market-collar" may well be a prolonged economic expansion with perhaps a volatile, but extended, cycle for spread-product outperformance versus government securities.