Vanguard Total Bond Market ETF
Why investors are preferring high-quality debt
High-quality bonds can be an investor refuge when there’s market volatility. These securities provide relatively stable cash flows. The default probability is low.
Investors Should Avoid Defensive Sectors If Rates Rise
Valuations are at the higher end of their historical range. Investors should avoid defensive sectors, which are highly sensitive to interest rate changes.
Must-know update: Redbook Index same-store sales data released
The Redbook Index released the same-store weekly data on Tuesday, March 11, 2014.
Market Volatility Could Fall More This Week
Volatility in the global markets fell considerably in the previous week. The key risks subsided that spiked risk aversion in the last few weeks.
Must-know update: Are retail sales poised for a spring surge?
For the week ended March 15, retail same-store sales grew 0.7% and 1.5% week-on-week and year-on-year, respectively.
Ray Dalio Says Interest Rate Hikes Could Lead to Bear Market
Dalio is worried about the long-term economic outlook, and he believes that the strengthening macroeconomic data, specifically wage growth and inflation, could encourage the Fed to continue its aggressive monetary policy.
Must-know: Why refinancing remains the focus for leveraged loans
Unlike the previous week, last week, issuers swarmed the market with repricing deals. Nearly half of the deals were refinancing.
Why last week was again positive for the leveraged loan market
A bullish week Last week was yet another bullish week for the leveraged loan market. A total of 12 deals priced almost $13 billion worth of leveraged loans (BKLN). Extremely robust pipeline The forward pipeline stood at just over $50 billion at the close of last week. This level is the second highest since last […]
Recommendation: You should favor longer-dated Treasuries
The 10-year Treasury yield still appears attractive relative to sovereign rates elsewhere in the world. In addition, longer-dated Treasuries also look more attractive than those with two- to five-year durations.
Why Did the US Federal Reserve Turn Hawkish at Its June Meeting?
As expected, the Federal Reserve increased the interest rate by 25 basis points after its June meeting, which concluded on June 13.
Case-Shiller 20–city Index continued to favor higher home prices
The Case-Shiller 20-city Index report released on Tuesday, March 25, 2014, also pointed at an improvement in home prices.
Must-know: How will this week’s JOLTS report impact US debt?
JOLTS (the “Job Openings and Labor Turnover” report) produces monthly estimates of job openings, hires, quits, layoffs and discharges, and other separations.
What New Developments Can You Expect from the Fed?
Potential new developments from the Fed include a suggestion by the subcommittee on communications that median values of policymakers’ projections be published.
Bid-to-cover ratio strong for 4-week T-bills despite high supply
For the August 19 auction, the U.S. Treasury auctioned one-month T-bills worth $50 billion—unchanged from last week. The high discount rate for the auction came in at 0.035%—down from 0.04% the previous week. Demand for the bills was stronger—the bid-to-cover ratio came in at 3.86x—compared to 3.73x last week.
Important releases hone in on rates and consumer spending
The hottest topic for market players right now is the interest rate hike. Last week’s labor releases spurred the recovery. Many investors had thought the recovery was flagging.
Pianalto’s take on the Fed funds rate before the financial crisis
When consumers can borrow at lower interest rates, they can afford to buy more goods and services, and the businesses that supply those goods and services can hire more people.
How will this week’s consumption indicators impact debt securities?
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.
The Fed starts monetary tightening: What’s next for junk bonds?
Key implications of the Fed’s QE3 exit for junk bonds and leveraged loans The Fed’s policy statement at the end of its October Federal Open Market Committee (or FOMC) last week stressed the improving economy. In a first, it also mentioned that measures of labor market slack had reduced. The risk of inflation falling persistently […]
Rising Stocks and Bonds Continue to Lower Volatility
Last week, volatility in global markets continued to trend lower as US markets, barring the Dow 30, closed on a positive note. In this series, we’ll analyze how different asset classes performed last week, and discuss their outlook.
Is the FOMC Confident about Effecting a Rate Hike in 2015?
Though policymakers have clearly stated that they’d be data-driven while deciding on effecting a rate hike, it seems that there’s more than economic indicators on their mind.
Why Was VIX Index Down 16% Last Week?
After a 20% surge in volatility in the week of September 4, volatility in the global markets dropped as markets opened on September 11.
Low Interest Rates Have Kept Bond Yields Low
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.
Benefit of Hindsight: The Fed Wasn’t Going to Raise the Rates
Some participants had maintained that the Fed shouldn’t raise rates in September, but many participants thought that the Fed would “liftoff” at this meeting.
Your Update on the FOMC July Meeting
In its July meeting, the Federal Open Market Committee decided to maintain its target range for the federal funds rate at 1%–1.25%, in line with the market’s expectations.
Are We Headed for Another Week of Low Volatility?
The ascent of the global markets continued last week, with indexes continuing to scale new heights.
Europe and China ready to jump-start their economies
Unconventional stimulus measures from central banks usually end up injecting liquidity in global financial markets. They’re especially relevant to emerging market economies.
James Gorman’s View on Global Bond Yield
Gorman thinks higher yield indicates the beginning of more normalization. In June, Fed chair Janet Yellen hinted that the Fed is moving toward normalization.
Why Kocherlakota wants the Fed to be free in its decision making
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.
Why Threats to Bond Markets Are Here to Stay
The real threat from rising rates is for bond markets.
A Weaker Euro Could Lead to Inflation in Europe
A weaker euro could lead to inflation in Europe. The depreciation in the euro was initially due to the appreciation in the dollar.
Investors keep providing liquidity to investment-grade bonds
While issuers’ activity waned last week, many investors continued to pore over the new issues that hit the corporate bond market (LQD).
Are the Markets Too Optimistic?
Market participants were caught by surprise when they read that the Federal Open Market Committee’s members were concerned about slowing growth in the US economy during 1Q17.
A Sign That the Jobs Market Could Tighten More
According to the April JOLTS report, there were 6.7 million job openings at the end of April compared to 6.6 million in March.
Clearing up a common misconception about bond ETF management
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.
Will Bond Market Rally Take a Break amid Interest Rate Hikes?
The possibility of a delayed Fed rate hike might have put a plug on U.S. Treasury yields, ensuring more days of a cheap dollar environment.
Must-know: Why volatility is likely to tick up in September 2014
While volatility fell over the course of August, the VIX’s daily average for last month was approximately 15% higher than its average over the previous three months.
Why corporate bonds reacted to the QE3 exit and GDP surprise
Bond yields and prices move in opposite directions. Due to the increase in yields last week, returns on investment-grade bonds were negative.
Will FOMC Keep Tightening Screws on the US Economy?
FOMC members after the latest policy statement have remained biased toward further rate hikes, but markets have questioned the Fed’s hawkishness.
Where Should You Invest Given This Low Yield Environment?
While high yield bonds could be an avenue for higher yields, they seem risky given the slowing global economy and low oil prices. In such a scenario, preferred stocks could offer some value.
Will the Bond Market Recovery Continue this Week?
US bond markets (BND) saw some recovery last week. Overheated expectations for a December rate hike cooled off after the FOMC meeting minutes were reported.
Miller: Bond Bear Market to ‘Propel Stocks Significantly Higher’
Legendary value investor Bill Miller has an optimistic view on the equity market.
Will Volatility Fall this Week?
Stock market volatility around the globe continued to trend lower as uncertainty about German elections, North Korea, and US tax reforms subsided.
Can ‘Patience’ Give Way to Something Else in March 2015?
The FOMC will meet for its next scheduled meeting on March 17–18, 2015. Markets will be watching for a change in the language of the FOMC’s forward guidance.
Could an adverse reaction to Fed tightening rattle the markets?
Another possibility is that an adverse reaction to Federal Reserve (or Fed) tightening could rattle markets. But here again, the risks are likely overstated.
Why Equity Markets Continue to Remain Unaffected by the FOMC
The US equity markets (SPY) haven’t seen any major impacts from the Fed’s policies in the recent past.
Gundlach on Higher Yield: Watching the Copper-to-Gold Ratio
Billionaire investor and bond guru Jeffrey Gundlach also shared his view on bond yields in an interview with CNBC.
Is the Fed Sure What It’s Doing?
In this series, we’ll analyze Fed members’ comments in June 2017 to better understand their outlooks on the US economy and how they justify their hawkish or dovish stances.
Why there might be a downside to a strong US economy
Of course, a strengthening U.S. economy may have a downside. If the Federal Reserve (or Fed) increases interest rates too soon or by too much, markets could be rattled.
Bill Gross Believes the US Could Experience a Recession
While acknowledging the importance of the Fed’s zero-bound interest rate policy in helping asset prices stabilize, Bill Gross also believes it tends to create asset bubbles.
When Do Mega Caps Outperform Small Caps?
Mega caps outperform small caps when interest rates rise. The last two rising rates scenarios took place during the late 90s and in the mid-2000s.
What Are the Implications of a 2% Federal Funds Rate?
A 2% federal funds rate could certainly affect stock and bond prices. They would start to tumble almost instantly.
Markets Look at US-China Trade Talks as Slowdown Concerns Multiply
Today, another round of trade talks started in Beijing.
Macro investment recovers: Time to short the long end of the curve?
This article considers the possibility of rising rates and the case for taking a bearish view on bond prices.
Recommendation: Keep municipal bonds in mind
While no longer cheap per se after their extraordinary run in 2014, municipal bonds continue to look attractive versus both Treasuries and corporate bonds.
Sell-Off in US Stocks as US Treasury Yields Soar
On October 3, US bond yields (BND) soared due to a bond sell-off. The sell-off continued on October 4, though at a slower pace.
Must-know: Future impacts of financial stability measures
The Fed currently uses considerable staff resources in monitoring financial markets for risks arising from financial instability.
What Should You Expect from Monetary Policy Announcements?
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.
Why does the loan market see continued interest from investors?
Last week, the leveraged loan market (BKLN) had an inflow of $411 million compared to $600 million inflows in the previous week.
Unique opportunities for investors given new monetary policy outlook
I’ve discussed on The Blog how an investor can think of the federal funds rate and QE as a gas pedal. Sometimes it’s good to ease off a bit to limit the pace of acceleration.
Why are high yield volumes strong despite fund outflows? (Part 4)
Continued from Part 3 Leveraged loans remain resilient On leveraged loan land (BKLN), the high volatility of the bond markets (BND) doesn’t seem to exist. While high yield bond issuance (JNK) has been up and down depending on the weather, leveraged loans have remained relatively resilient over the past month. Steady volumes, aggressive issuance Volumes last […]
Why the decline in Treasury rates helped the leveraged loan market
Contrary to high yield bonds (HYG), leveraged loans posted a better-than-expected week.
Primary markets update—US Treasuries and high-grade bonds
Investment-grade debt has low credit risk. It’s usually an investor refuge when market and geopolitical risks run high. Investors shy away from riskier investments when market risks increase.
If This Is the Deep Panic Jim Paulsen Talked About, Start Buying
Jim Paulsen, The Leuthold Group’s chief investment strategist, thinks that after the ugly December for markets, investors’ panic is in the later stages.
What caused the sharp drop in yields last week?
A number of market watchers attributed Wednesday’s 10-year Treasury yield move to fears about a global economic slowdown, heightened geopolitical unrest, growing worry over the Ebola health risk and uncertainty about Fed policy.
The must-know outlook for equities and bonds in 2014
The Fed, in its latest announcement, has further reduced its bond buying program to $55 billion a month, signalling that the improvement in the economy is on track.
Why are high yield volumes strong despite fund outflows? (Part 6)
Continued from Part 5 Cause for concern? With the issuance volumes across the high yield bond market and the leveraged loan market, the market seems like it should be back on a healthy note. On the other hand, the strong outflows in the high yield market the previous week are a reason for concern. August […]
How Green Bonds Can Help Diversify Investor Base
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.
Investment-Grade Bond Fund Flows Slowed Last Week
According to Lipper fund flow data, investment-grade bond funds saw net inflows of $2.2 billion during the week ended August 17, 2016.
Comparing leveraged loans and high yield bonds: Investor base
Both leveraged loans (BKLN) and high yield bonds (HYG) have a similar investor base, with the exception of banks in leveraged loans.
Tapering and debt markets: Predicting the Fed’s upcoming view
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.
Why policymakers favor reducing MBS and Treasuries reinvestment
The Fed also embarked on three rounds of quantitative easing (or QE). Now, the Fed is looking to decrease the size of its bloated balance sheet.
Why the FOMC believes that credit conditions are still strong
Easier borrowing conditions stimulate business investment among firms. Higher investment would generate employment and benefit firms’ revenues and profits.
What goes up comes crashing down: Bonds in the doghouse (Part 2)
High yield bonds (JNK) are also in the doghouse High yield fund flows reversed significantly last week after two strong weeks leading up to the FOMC (Federal Open Market Committee) meeting. The question now is whether these outflows were temporary caution prior to the meeting, or if investors have packed up and left for sure. High yield (HYG) fund […]
Why these 5 states saw the highest home price appreciation
Home prices rebounded 0.8% in December after easing 0.1% the month before. Excluding some monthly volatility, home prices have been in an uptrend.
Why you should know the key differences between job reports
Few economic releases elicit as much reaction from both the stock (IVV) and bond (BND) markets as the employment reports issued by Automatic Data Processing (ADP) and the Bureau of Labor Statistics (the BLS).
Must-know: What investment-grade corporate bonds expect in 2015
U.S. investment-grade corporate bonds (LQD) weathered higher market volatility well in 2014. They’ve been a steady source of returns for investors.
Must-know: The success of the Fed’s taper on bond yields
At the September meeting, the Fed announced that it would taper monthly bond purchases by another $10 billion. The monthly bond purchases would be $15 billion per month starting in October. Monthly bond purchases would now consist of $10 billion in longer-term Treasuries (BND) and $5 billion in agency mortgage-backed securities.
Letting Alternative Investments Hedge Your Returns against Deflation
An alternative investment is an investment in asset classes other than stocks, bonds, and cash that seeks to provide a hedge against various market risks.
Has Britain Really Voted Its Way to Prosperity?
The Brexit referendum aftermath has translated to gains for certain hedge funds, while washing away earlier gains for others.
US Steel Industry’s Woes Are Far from Over
Most steel stocks continue to trade near 52-week lows. U.S. Steel Corporation (X) has fallen more than 70% year-to-date.
Alternative ETFs’ Investment Strategy Guide
A liquid alternative ETF, the ProShares Large Cap Core Plus ETF (CSM) tracks a long-short index of Credit Suisse 130/30.
Week Ending May 27 Sees Outflows in Investment-Grade Bond Funds
Flows into investment-grade (LQD) bond funds ventured into negative territory for the week ended May 27.
Why high yield weekly issuance continues to favor suppliers
Last week ended on a similar mood as the previous week. Issuers continued to supply bonds to the hungry market. High yield issuance ended the week 26% higher than the previous week.
Must-know: Key questions to ask when selecting an ETF
iShares now offers 20 low-cost Core ETFs that are a great starting point to consider as core holdings for your portfolio.
Must-know: Trends in the 1-month T-bills auction
Primary dealer allotments averaged ~69.4% at the last ten auctions held by the U.S. Treasury. Indirect and direct bidder allotments averaged 26.3% and 4.4%.
Small caps trade at a premium, but can you justify this premium?
Today, small-cap indices are trading at a relatively expensive level versus large-cap companies. When real rates were negative, this premium was more justified.
Bank stress tests and enhanced US banking institution standards
Signs of financial stress in Global Systemically Important Banks (or GSIBs)—like Citigroup and JPMorgan (or JPM)—would impact the entire financial system. The signs of stress would impact stocks and bonds (BND). As a result, it’s important that the Fed and other regulators establish a suitable regulatory and supervisory framework.
Jeffrey Gundlach Advises Investors to Invest in Mortgages
During a gradual rate hike scenario, Gundlach believes investment in mortgages is the best strategy.
Investment-Grade Bond Funds Saw Inflows Last Week
Flows into investment-grade bond funds were positive last week. Investment-grade bond funds saw net inflows of $907.1 million during the week ending July 6.
The road ahead: Why yields are in for a rocky ride
It’s clear that yields are likely in for a rocky ride as seasonal factors and technical unwinds of crowded positions play out in the weeks ahead, and as we get closer to a Fed rate hike.
Why investment-grade bond issuance last week beat expectations
Investors willing to take a little higher risk than what they find in Treasuries, if they’re in search of higher returns, can consider investing in investment-grade corporate bonds.
Must-know: Is the economic glass half full or half empty?
Outlook The week started with somewhat disappointing news: the Purchasing Managers’ Index (or PMI) for January, at 51.3, came in significantly lower than December’s figure, by 5.2. Despite there being an increase of 3.2 in consumer spending, markets anxiously awaited the employment status report issued on Friday. This is because—though the economy had expanded—the slowing […]
Dalio’s Bridgewater Associates Increased Its Holdings in EWZ
Ray Dalio increased his firm’s holdings in the iShares MSCI Brazil Capped ETF (EWZ) in 2Q16.
Analyzing How US Treasury Performed in 2017
The iShares 20+ Year Treasury Bond ETF (TLT), which tracks the performance of the US long-term Treasury bond, rose 8.9% in 2017.
Investment-Grade Bond Funds Saw Outflows Last Week
Flows into investment-grade bond funds (LQD) were negative in the week ending June 17. This was the second consecutive week witnessing outflows.
Bear strategy: Profit from rising rates with fixed income ETFs
Investors could consider hedging their short-term duration risk (HYG: 3.98 years, JNK: 4.20 years) with a short position in longer-dated bonds.
Why Gundlach Believes the Bond Market Is Set Up for a Rally
Prominent bond investor Jeffrey Gundlach discussed the bond market’s performance and his expectations for the bond market in a recent interview.
Must-know: Important US releases point to a stronger economy
Meanwhile, outside of the jobs report, other U.S. economic releases are painting a consistently positive picture of the domestic economy.
Are We at the End of a Business Cycle?
An early contraction, middle bear phase seems to suggest that we are near the end of the current business cycle.
Can Arconic Get an Investment Grade Credit Rating after the Split?
Alcoa (AA) was targeting an investment grade credit rating (BND) for Arconic, but the company seems comfortable with a split rating.