Vanguard Total Bond Market ETF

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.

Valuations are at the higher end of their historical range. Investors should avoid defensive sectors, which are highly sensitive to interest rate changes.

The Redbook Index released the same-store weekly data on Tuesday, March 11, 2014.

Volatility in the global markets fell considerably in the previous week. The key risks subsided that spiked risk aversion in the last few weeks.

For the week ended March 15, retail same-store sales grew 0.7% and 1.5% week-on-week and year-on-year, respectively.

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.

Unlike the previous week, last week, issuers swarmed the market with repricing deals. Nearly half of the deals were refinancing.

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 […]

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.

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

The Case-Shiller 20-city Index report released on Tuesday, March 25, 2014, also pointed at an improvement in home prices.

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

Potential new developments from the Fed include a suggestion by the subcommittee on communications that median values of policymakers’ projections be published.

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.

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.

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.

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.

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 […]

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.

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.

After a 20% surge in volatility in the week of September 4, volatility in the global markets dropped as markets opened on September 11.

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.

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.

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.

The ascent of the global markets continued last week, with indexes continuing to scale new heights.

Unconventional stimulus measures from central banks usually end up injecting liquidity in global financial markets. They’re especially relevant to emerging market economies.

Gorman thinks higher yield indicates the beginning of more normalization. In June, Fed chair Janet Yellen hinted that the Fed is moving toward normalization.

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.

The real threat from rising rates is for bond markets.

A weaker euro could lead to inflation in Europe. The depreciation in the euro was initially due to the appreciation in the dollar.

While issuers’ activity waned last week, many investors continued to pore over the new issues that hit the corporate bond market (LQD).

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.

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.

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.

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.

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.

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

FOMC members after the latest policy statement have remained biased toward further rate hikes, but markets have questioned the Fed’s hawkishness.

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.

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.

Legendary value investor Bill Miller has an optimistic view on the equity market.

Stock market volatility around the globe continued to trend lower as uncertainty about German elections, North Korea, and US tax reforms subsided.

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.

Another possibility is that an adverse reaction to Federal Reserve (or Fed) tightening could rattle markets. But here again, the risks are likely overstated.

The US equity markets (SPY) haven’t seen any major impacts from the Fed’s policies in the recent past.

Billionaire investor and bond guru Jeffrey Gundlach also shared his view on bond yields in an interview with CNBC.

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.

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.

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.

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.

A 2% federal funds rate could certainly affect stock and bond prices. They would start to tumble almost instantly.

Today, another round of trade talks started in Beijing.

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

While no longer cheap per se after their extraordinary run in 2014, municipal bonds continue to look attractive versus both Treasuries and corporate bonds.

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.

The Fed currently uses considerable staff resources in monitoring financial markets for risks arising from financial instability.

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.

Last week, the leveraged loan market (BKLN) had an inflow of $411 million compared to $600 million inflows in the previous week.

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.

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 […]

Contrary to high yield bonds (HYG), leveraged loans posted a better-than-expected week.

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.

Jim Paulsen, The Leuthold Group’s chief investment strategist, thinks that after the ugly December for markets, investors’ panic is in the later stages.

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 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.

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 […]

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.

According to Lipper fund flow data, investment-grade bond funds saw net inflows of $2.2 billion during the week ended August 17, 2016.

Both leveraged loans (BKLN) and high yield bonds (HYG) have a similar investor base, with the exception of banks in leveraged loans.

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.

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.

Easier borrowing conditions stimulate business investment among firms. Higher investment would generate employment and benefit firms’ revenues and profits.

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 […]

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.

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).

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

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.

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.

The Brexit referendum aftermath has translated to gains for certain hedge funds, while washing away earlier gains for others.

Most steel stocks continue to trade near 52-week lows. U.S. Steel Corporation (X) has fallen more than 70% year-to-date.

A liquid alternative ETF, the ProShares Large Cap Core Plus ETF (CSM) tracks a long-short index of Credit Suisse 130/30.

Flows into investment-grade (LQD) bond funds ventured into negative territory for the week ended May 27.

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.

iShares now offers 20 low-cost Core ETFs that are a great starting point to consider as core holdings for your portfolio.

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%.

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.

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.

During a gradual rate hike scenario, Gundlach believes investment in mortgages is the best strategy.

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.

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.

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.

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 […]

Ray Dalio increased his firm’s holdings in the iShares MSCI Brazil Capped ETF (EWZ) in 2Q16.

The iShares 20+ Year Treasury Bond ETF (TLT), which tracks the performance of the US long-term Treasury bond, rose 8.9% in 2017.

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

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.

Prominent bond investor Jeffrey Gundlach discussed the bond market’s performance and his expectations for the bond market in a recent interview.

Meanwhile, outside of the jobs report, other U.S. economic releases are painting a consistently positive picture of the domestic economy.

An early contraction, middle bear phase seems to suggest that we are near the end of the current business cycle.

Alcoa (AA) was targeting an investment grade credit rating (BND) for Arconic, but the company seems comfortable with a split rating.