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YIELD CURVE INVERSION HAS INVESTORS IN A TIZZY

  • Scott Carmack
  • Aug 16, 2019
  • 1 min read

Updated: Mar 5, 2024




The markets sold off early this week because of concerns over an inverted yield curve. Despite much of the yield curve having been inverted for months, 2-10’s inverted for the first time since 2007 and financial media decided to propagate this narrative. Let’s be clear – the fixed income market has been flashing warning signs for much of the year and the marginal difference between 10 basis points of steepness and a barely-inverted yield curve is negligible. We have been advocates of defensive positioning since the Spring, but don’t advise overreacting to the last 10 bps of flattening and do not recommend chasing duration after this dynamic move lower in yields.

 
 

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Holbrook Structured Income Fund

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Investments in mutual funds involve risk including possible loss of principal. There is no guarantee that any investment strategy will achieve its objectives, generate profits, or avoid losses. The Fund invests in closed end investment companies or funds. The shares of many closed end funds, after their initial public offering, frequently trade at a price per share that is less than the net asset value per share, the difference representing the “market discount” of such shares.

 

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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.

 

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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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