BTC iShares Core U.S. Aggregate Bond ETF

Today, most measures of credit conditions are positive, with tight spreads across all of fixed income. Even high yield spreads have come in after a short scare last month.

After September’s strong jobs numbers, a Fed rate hike could be on the horizon early next year. Russ explains two equity market implications.

Why Gold’s Resilience Continues in July Following the June 23 Brexit vote when the UK chose to withdraw from the European Union, bond yields fell to record lows and gold rallied to two-year highs, reaching $1,375 per ounce on July 6. In the US, subsequent strong economic results in manufacturing, retail sales, and housing created […]

In the week ending August 8, weekly investment-grade bond (LQD) issuance surged by 222%, week-over-week to come in at $24.975 billion over 19 deals. Issuance was driven by refinancing older and costlier debt, acquisition related financing, share-repurchases, and other general corporate purposes.

As expected, the Federal Reserve increased the interest rate by 25 basis points after its June meeting, which concluded on June 13.

JOLTS (the “Job Openings and Labor Turnover” report) produces monthly estimates of job openings, hires, quits, layoffs and discharges, and other separations.

The Federal budget deficit (the difference between budget collections and the government’s commitments) has also been a key source of uncertainty to both businesses and households.

This week, markets will be looking at any clues revealing hints for the outcome of the Fed’s next Federal Open Market Committee Meeting (or FOMC) slated for March 18–19.

Weakness in the labor market means low interest rates. The US economy is gaining momentum with stellar growth rates in the last two quarters. It grew by 4.6% in 2Q14.

Kocherlakota gave a presentation at the annual American Economic Association conference. He was firmly in favor of letting the Fed be free in its decision making.

With the earnings season in full swing, issuance levels have fallen over the past few weeks—a number of corporate borrowers are subject to blackout periods preceding their quarterly earnings releases.

A bond ETF is managed by a human (sometimes several). A common misconception about bond ETFs is that they simply hold all the securities in the index they track.

Treasury yields on the long-end of the curve, were down since the conclusion of the Fed’s last FOMC meeting on June 18—30-year and ten-year Treasury yields had fallen by 12 bps and three basis points (or bps), respectively over the period June 18 to July 30.

Bond yields and prices move in opposite directions. Due to the increase in yields last week, returns on investment-grade bonds were negative.

Investment-grade bond (AGG) funds saw net inflows of $1.53 billion in the week ending May 1, 2015.

On August 15, yields on ten-year notes (IEF) and 30-year bonds (TBT) both fell by ten basis points to 2.34% and 3.13%, respectively. This was also their lowest level in over a year.

If you had to sum up investing in the US markets after the Great Recession in a few words, you would probably say something like “the quest for yield.”

Today, another round of trade talks started in Beijing.

Credit spreads associated with lower rated bank loans found in SNLN and BKLN could underperform as corporations see cash flow decline and their ability to service their debt is compromised.

This article considers the possibility of rising rates and the case for taking a bearish view on bond prices.

Today, President Donald Trump told reporters, “Our country’s doing unbelievably well economically.”

Most FOMC participants indicated that they preferred to consider a possible rate hike on a meeting-by-meeting basis—without providing any hints about the timing of a rate hike.

The first week of May is packed with key macro events. On the monetary front, we have the FOMC meeting scheduled during the week and the all-important April jobs numbers set to come out on Friday.

A softer rebound could move markets in the second quarter. If the economy remains weak in the second quarter, the Fed has some leeway to maneuver the rate.

Green bonds carry the same risk-return profile as conventional bonds. However, these bonds fund projects focused on energy efficiency, clean water, transportation, biodiversity, and sustainable waste management.

“The next downturn may be a difficult one for central banks to reverse,” warned Ray Dalio, CEO of the world’s largest hedge fund.

Where’s the relative value within fixed income? High yield bonds appear relatively attractive.

Even if we assume that green bonds don’t offer any significant premium over conventional bonds, there are many who believe in other noteworthy advantages of green investing.

Possibly the most important indicator for the debt markets going forward will be provided by Fed Chairman Janet Yellen’s semi-annual monetary policy testimony.

A diversified portfolio—one in which funds are divided among various asset classes, like stocks, bonds, or real estate—would usually have lower risk than an non-diversified portfolio.

U.S. investment-grade corporate bonds (LQD) weathered higher market volatility well in 2014. They’ve been a steady source of returns for investors.

In this series, we’ll introduce you to the concept of exchange-traded funds (or ETFs). You’ll find out about the types of ETFs and how they can help your portfolio.

This article considers the Federal Reserve Bank’s continued struggle to reach its inflation target and the implications for fixed income investors.

Investors seeking exposure to investment grade or high yield corporate debt have increasingly been using fixed income ETFs.

Economic data usually influences investment-grade bond yields, including Treasuries (TLT) and corporates (AGG) (LQD). Yields tend to fall on negative economic data. They rise when economic data is positive. Demand for safer investment-grade debt rises when economic growth concerns surface. This tends to raise their price and lower yields.

Flows into investment-grade bond funds (LQD) were negative in the week ending June 17. This was the second consecutive week witnessing outflows.

In this part, we will discuss aspects of Plosser’s speech relating to a rules-based or systematic approach to forward guidance.

We can expect muted returns from US equities going forward. US stocks face the prospect of higher interest rates, albeit gradual and from unusually low levels.

This article considers the ongoing decline in the federal budget deficit and considers the implication for fixed income investors.

Investment-grade bond yields usually follow cues from the Treasuries market. With a fall in Treasury yields, investment-grade corporate bond yields also fell.

Puerto Rico’s labor force participation rate was about 40% in April, 2014.

Global uncertainty, Brexit, and the prospect of further easing from central banks in developed markets have spurred demand for government debt.

For those who want a little more adventure on their menu, there’s always the option of adding some unique flavors like spicy kebabs. This is the equivalent of adding some emerging markets fixed income to your bond portfolio.

Bill Gross expressed his views on the markets and on the Fed’s decision to delay the rate hike in his Investment Outlook October 2015.

For investors, the implications are not to load up on bonds, but to tactically look for areas of relative value within fixed income.

The Treasury’s newest issuance of floating rate notes, or FRNs, on January 29, commanded immense investor interest. The $15 billion issue received bids for 5.67 times the issue amount.

When real interest rates decline, the prices of long-term bonds increase because bond yields and prices move in opposite directions.

This article considers the trade-offs between high-credit-quality and lower-credit-quality, as well as shorter-duration and longer-duration, fixed income ETFs.

In the coming months, yields are likely to trend higher as the Fed moves closer to ending the taper and tightening monetary policy.

The difference between five-year and 30-year Treasury (TLT) yields narrowed to 142 basis points (or bps) on September 26. This is the narrowest it has been since January 16, 2009.

When uncertainty rises, equity markets become volatile, and bond spreads rise. Brexit is likely to have a similar effect on capital markets.

The risk-return metric for ten-year Treasuries (IEF) are lowest, but also the safest, with a paltry 1.3% volatility and with an average yield of 4.1%.

Fostering price stability is one of the Fed’s most important goals.

Primary dealer takedown was lower due to higher market demand. It was 36% of competitive accepted bids—down from 38.5% in February’s auction.

Net foreign purchases of long-term securities came in at $19.4 billion.

After stating her expectation of a rate hike, Yellen noted that robust household spending was helping US economic activity expand.

As we’ve seen, green bonds add value to the environment. But they can also provide you with diversification benefits.

In the June FOMC meeting, the weighted average forecast was much lower at ~70 basis points. Both stocks and bonds rallied after the meeting.

Last week was strong in terms of issuance volumes in the primary capital markets. High-quality bond issuance touched $51.3 billion across 42 issues in the week ending November 7.

Goldman Sachs (GS) has long been bullish on gold. In March 2018, the bank turned positive on gold (IAU) for the first time in more than five years. It’s since been advising investors to turn defensive due to its forecast of increased risk, recommending that investors go for high-quality stocks and gold.

Bond prices and interest rates have an inverse relationship. If an interest rate increases, the price on a bond declines, and vice versa.

FRNs represent an effective way for investors to benefit from the anticipated rising interest rate environment and also provide a safer place to park cash.

Bonds are highly sensitive to credit risk—other than U.S. Treasury securities, which are more prone to interest risk. Credit risk hugely varies.

Credit ratings assess the credit-worthiness of a borrower and assign a grade based on the borrower’s business operation and financial stability.

The U.S. Treasury Department’s latest issue on January 29, the floating rate note (or FRN) will fulfill two investor needs: participating in anticipated future interest rates increases and protecting principal against default.

On January 29, 2014, the U.S. Treasury Department issued a new class of security: the floating rate note (or FRN). This is the first new security introduced by the Treasury since 1997.

The Mortgage Bankers Association’s (the MBA’s) Purchase Applications Index is a weekly measurement of home loan applications.

The National Federation of Independent Business (or NFIB) will release the Small Business Optimism Index on Tuesday, March 13.

The 26-week T-bill was also auctioned on Monday, March 10. The T-bill rate for the auction came in at 0.08%, unchanged from last week’s auction.

A ratings upgrade or downgrade has a direct impact on fixed income yields, and therefore directly affects bond prices.

There are various measures used to compute the yields on bond funds, the most commonly used ones being the SEC yield and the distribution yield.

Loretta Mester is the new president and chief executive officer of the Federal Reserve Bank of Cleveland. She has taken over the reins from Sandra Pianalto, who retired on May 31.

This week is full of indicators, with most of them being measures of national-level economic activity.

Unlike the regional manufacturing surveys conducted by the Federal Reserve Banks of other districts, the CFNAI is a nation-wide measure.

Bond yields and prices move in opposite directions. As a result, returns on high-quality corporate bonds were positive. This year, demand for U.S. investment-grade debt benefited from geopolitical tensions overseas and economic growth fears in the first quarter. This raised prices and lowered yields on high-quality corporate bonds.

Last week, both the ICSC–Goldman Sachs Retail Chain Store Sales Index and the Johnson Redbook index recorded strong year-on-year gains.

Treasury yields and yields on U.S. corporate bonds usually move in the same direction in response to economic data. Due to the factors described in the previous part of this series, yields on corporate bonds rose over the week.

Despite favorable market conditions, high-grade corporate bond (AGG) issuance was muted in the week ending August 15. Issuance usually has a seasonal slowdown in July and August. There had also been a surge in primary market issues the previous week.

The release of the Fed’s Federal Open Market Committee (or FOMC) minutes for the June meeting, exerted a considerable influence over debt markets (AGG) last week.

Using stock portfolios to generate income while simultaneously building equity-like exposure in bond portfolios is becoming risky in some scenarios.

However, there are segments of the dividend space that still look interesting: international and global dividend stocks. Here are two reasons why.

Generally, bond yields increase when the economy is expanding because the central bank will likely raise rates sooner rather than later—the demand for financing for funding new projects also increases which generally tends to increase rates.

High yield bonds like the SPDR Barclays Capital High Yield Bond ETF (JNK) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) are riskier assets compared to investment grade bonds (AGG) and straight Treasuries (TLT).

One of the reasons why fixed income investing has been greatly favored by investors is because bonds help diversify the risk that comes from a pure equity portfolio.

Widening spreads indicate a slowing economy. Since companies are more likely to default in a slowing economy, credit risk related to their bonds rises.

Corporate debt (debt issued by corporations) can be classified in various ways. It can be classified in terms of the maturity, the type, or the issuer’s credit quality.

If you’re a bond (BSV) (AGG) investor or fund manager, fluctuation in interest rates is one of the key risk drivers for the returns you get from your portfolio.

In a recent appearance at the Delivering Alpha conference, Ray Dalio commented on the amount and nature of debt in the global (VTI) (ACWI) economy.

Owning an ETF comes with some fees. These fees are called “expense ratios” because they’re expressed as a percentage of a fund’s assets.

To see how expense ratios can affect investments over time, let’s compare the returns of several fixed income ETFs that differ only in expense ratio.

In practice, asset owners (both retail and institutional) want to avoid significant portfolio drawdowns even if the benchmark index declines.

International bond funds like the Vanguard Total International Bond Index ETF (BNDX) can have various investment styles determined by their stated choice of bond investments.

U.S. investment-grade bonds are also often seen as a refuge for both domestic and international investors when market risk spikes. U.S. bond markets were impacted by Argentina’s sovereign debt default and Portugal’s banking crisis, involving one of its most prominent lenders, Banco Espirito Santo.

FRNs are usually issued in capital markets, whereas leveraged loans are arranged by commercial and investment banks. While FRNs are typically unsecured and investment-grade, leveraged loans are secured.

Target (TGT) made a two-part $2 billion offering. The retailer issued $1 billion each in five-year and ten-year notes, in order to refinance about $1 billion in existing debt.

Both the International Council of Shopping Centers (or ICSC) Goldman Sachs Store Sales report and the Johnson Redbook Index report for the week ended April 5 will be released on Tuesday, April 8.

Other factors remaining constant, the higher the expected rate of inflation, the higher the required rates of return on both debt (AGG) and equity (VOO) investments, and vice versa.

Jeffrey Gundlach, CEO of DoubleLine Capital, said yesterday that US Treasury yields (TLT) are likely to rise further.

The US Bureau of Economic Analysis released its personal consumption expenditure (or PCE) price index today. The PCE index is the Federal Reserve’s preferred gauge of inflation.

As far as the Fed’s next moves are concerned, Gundlach said that if the market forces are allowed to prevail, interest rates should go up even in the next downturn.