But if I knew how to manage my portfolio safer and smarter than most hedge fund managers, I could realistically grow my wealth.
When The Net Asset Value Of A Bond ETF Differs From Market Price
The Intraday Indicative Value gives us a more real-time value than the bond ETF’s NAV. It’s considered an implied value of an ETF.
The calculation of a bond ETF’s underlying value is going to be less precise than a stock ETF’s underlying value.
The management of bond ETFs is a more complex task that involves sampling representative bonds from a given index.
Although bond ETFs in the US are less liquid than the stock ETFs (SPY), they are more liquid than those in some other developed markets (EFA).
The turmoil in high yield bond markets has left more than 18% of junk bond issuers at distressed levels. Investors should avoid the scary junk bond segment.
For now, you should avoid high-yield bonds in the energy sector. Due to the sudden slump in crude oil (USO) prices, energy companies’ (XLE) cash flows are at risk.
Excessively low rates have side effects. Treasury yields have been beaten down due to the Fed’s excessive buying. Currently, the ten-year Treasury (IEF) yields are 2.1%.
The U.S. Department of the Treasury kept the weekly auction amounts for four-week T-bills constant last week. The auction was conducted on December 9. The issuance was $50 billion.
T-bills, don’t pay a coupon. They’re offered at a discount to face value. They’re redeemable at par on maturity. The high discount rate for the December 8 auction came in at 0.025%.
The share of primary dealer bids fell from 61.5% to 56.9% in the week. A fall in the percentage of primary dealer bids is a sign of stronger fundamental market demand.
Despite unchanged issuance, demand for the securities was weak. The bid-to-cover ratio fell 4.2% to 3.4x month-over-month.
Consumer sentiment as measured by Thomson Reuters and University of Michigan’s report rose to 93.8 based on a preliminary reading for December 2014.
By 2009, the budget deficit had run up to nearly 10% of the GDP. Yet for fiscal 2015, the Congressional Budget Office expects the deficit to shrink to 2.6%
Excluding motor vehicles and parts, retail sales rose 0.5% from October. Retail sales in the 11 months to November are up 4% over the same period in 2013.
The bid-to-cover ratio is an important demand indicator. It’s the total value of bids received divided by the value of securities on offer.
Market demand for the securities rose sharply to 74.1% of the competitive accepted bids—compared to 57.6% at November’s auction.
Market demand for the ten-year note was strong in December—the highest since March 2013. This was primarily due to higher indirect bids.
The demand for long-term Treasuries has gone up, while personal consumption expenditures—a measure of inflation—have stayed below policymakers’ 2% target.
In the new fixed income landscape, you can find yield in high-yield bonds. These bonds have the highest chances of defaulting. As a result, they trade at a discount.
Ultra-low yields mean holding Treasuries could be risky. Most developed markets (EFA) are seeing low Treasury yields. Japan (EWJ) and Germany (EWG) are seeing ten-year Treasury rates below 1%.