As the Fed prepares to raise rates for the first time since 2007, the corporate high yield debt market, aka the junk bond market, is in serious crisis mode. The talking heads on TV say that everything is fine if you exclude energy but this is eerily similar to them saying that the S&P is fine excluding financials in 2007.
Do Higher Yields Mean Higher Risks For Captive Insurance Investment Portfolios?
Captive Investing Today
Since the financial crisis began in 2007, the Federal Reserve has taken extraordinary actions including reducing the level of short-term interest rates to near zero and pushing long rates to historic lows. This has impacted captive insurance portfolios that strive to safely generate enough investment income to cover operating costs, maintain statutory reserves, and pay claims when needed. With new Fed chief Janet Yellen taking charge soon, most participants believe the key themes for 2014 will be timing of the Fed taper and how financial markets will react.