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COMBATTING THE CONUNDRUM

  • Scott Carmack
  • Jan 24, 2017
  • 1 min read

Updated: Mar 11, 2024




In 2005, Alan Greenspan, chairman of the Federal Reserve, used the term “conundrum” to describe the flattening of the yield curve in response to Fed tightening. At the time, the Federal Reserve had already raised the Fed Funds rate 150 bps, while ten and thirty-year yields remained stubbornly stable. History has shown that short and longer-term rates have rarely moved in a parallel fashion, and it is difficult to accept that Greenspan believed they would. A more likely motivation for Greenspan’s explanation is that he did not want to admit publicly what was truly happening—that rate hikes were curbing future growth and inflation.

 
 

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Holbrook Structured Income Fund

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The risk that the Fund could lose money if the issuer or guarantor of a fixed income security is unwilling or unable to make timely payments to meet its contractual obligations. The risk that foreign currencies will decline in value relative to the U.S. dollar and adversely affect the value of the Fund’s investments in foreign (non-U.S.) currencies. The derivative instruments in which the Fund may invest for hedging purposes may be more volatile than other instruments.

 

The Fund invests in fixed income securities or derivatives, the value of your investment in the Fund will fluctuate with changes in interest rates. These risks could affect the value of a particular investment by the Fund. Investment in or exposure to high yield (lower rated) debt instruments (also known as “junk bonds”) may involve greater levels of interest rate, credit, liquidity and valuation risk than for higher rated instruments. When the Fund invests in other investment companies, including ETFs, it will bear additional expenses.

 

The risk that investment strategies employed by the Fund’s adviser in selecting investments for the Fund may not result in an increase in the value of your investment. The Adviser’s use of computer trading modeling systems may perform differently than expected as a result of the factors used in the models.

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ABS may be more sensitive to changes in interest rates and may results in prepayments which can include the possibility that securities with stated interest rates may have the principal prepaid earlier than expected, which may occur when interest rates may have the principal prepaid earlier than expected, which may occur when interest rates decline. Rates of prepayment faster or slower than expected could reduce the Fund's
yield, increase the volatility of the Fund ad/or cause a decline in NAV.

The Holbrook Income Fund is distributed by Northern Lights Distributors, LLC, member FINRA/SIPC. Holbrook Holdings Inc. is not affiliated with Northern Lights, Distributors, LLC.

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