FROM: Lisa Sorani, Manager of HR Employee Services LS -
FROM: Lisa Sorani, Manager of HR Employee Services LS -
FROM: Lisa Sorani, Manager of HR Employee Services LS -
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POSSIBLE OUTCOMES: ‘BASE CASE’ SCENARIO<br />
r<br />
• Ideally, and by far the most positive, scenario on how the interest t rate environment evolves<br />
includes a relatively quick pick-up in economic growth which pulls down the unemployment<br />
rate<br />
• This would allow the Fed to discontinue its bond buying program and to eventually start<br />
raising interest rates at a slow-to-moderate pace. In addition, the Fed would slowly shrink its<br />
balance sheet as securities mature<br />
• In this ideal scenario, investors could position their portfolios so that bond maturities and<br />
interest are reinvested at the slightly higher rates <strong>of</strong>fsetting some <strong>of</strong> the capital loss<br />
• In this scenario, investors could hope to breakeven or experience a small loss over a<br />
moderate time period depending on how fast interest rates rise<br />
• We will consider this our “base case” and consider alternative scenarios with less optimistic<br />
outcomes<br />
Pension Consulting Alliance, Inc. ││ EBMUD Fixed Income Discussion │ 19
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