RECENT Fixed Income ETFs RESEARCH
Carl Icahn believes that another 2007-like crisis could be in the making. He thinks asset management companies like BlackRock are “extremely dangerous.”
The three US equity indices that we review in this weekly series rose in the week ending July 17. Apart from economic indicators, markets also focused on corporate earnings.
US economic indicators drove movement in investment-grade bond yields last week. A rise in gasoline prices led to an increase in US consumer prices in June.
A sharp fall in the Chinese stock market had its repercussions on US equities, which fell in response. But the losses were reduced after Chinese shares rose on the last two trading days of the week ended July 10.
Greece’s fate in the Eurozone drove investment-grade bonds last week. A safe-haven demand for most of the week pushed yields down. But investment-grade bonds saw yields rise week-over-week.
The non-farm payrolls report for June showed that the US economy added 223,000 jobs. This helped equities reduce losses. Wage growth remained tepid.
Investment-grade bond yields rose on the last day of trading last week as Greece’s creditors conditionally offered it financial aid to the tune of 15.5 billion euros.
US Treasury yields, especially those on long-term securities, rose with the hope that Greece would accept this eleventh hour deal.
A breakdown in negotiations led to Greece missing its payment due to the IMF on June 30. US equities reacted negatively to these developments.
The FOMC released its June 2015 monetary policy statement last week. Policymakers toned down their expectations for a rate hike in 2016 and 2017.
The Federal Open Market Committee’s June statement didn’t elicit a strong reaction in either direction from investment-grade bonds, especially not from Treasuries.
Due to the yields falling on Treasuries across medium-term maturities, fixed income ETFs investing in that maturity posted marginally higher returns.
Week-over-week, yields on investment-grade bonds barely moved. However, the meager movement didn’t represent a lack of activity in the secondary market.
As far as last week’s Treasury yields were concerned, two developments in Europe stood out—Greece’s debt negotiations and German bund yield movement.
While stock market volatility (VXX) has increased, bond volatility has seen a higher rise. You can expect high volatility in bonds (AGG) over the next few months.
The retail sales report was positive for equities, as it strengthens hope that the US economy will return to a strong footing following a weak first-quarter reading.
Bond market turmoil (BND) has been building up steam over the past month, and the gyrations continued to plague the markets well into this week.
The May non-farm payrolls report, which showed that 280,000 jobs were added in the month, led participants to believe that the Federal Reserve will hike rates this year.
US Treasury yields moved uniformly upwards across the yield curve in the week ended June 5, 2015.
Investment-grade bonds’ yields surged in the week ending June 5. The two jobs reports released last week were the primary drivers.