Displaying items by tag: bond funds

(New York)

Right now is high time for investors to be worried about bonds. Bond funds have received a lot of fast money in recent months because of the well-telegraphed rate cut. According to BAML, the net inflows into fixed income funds have reached a “staggering record” of $455 bn in 2019. That compares to just $1.7 tn in the last decade. Yields have tumbled this year, with ten-year yields down from 3.2% in November to just 2.06% now.

FINSUM: The outlook for bonds got murkier yesterday with the Fed’s relative lack of dovishness. It is not entirely clear that rates are going to keep falling, so it is not hard to imagine bonds facing some losses now given how much speculation there was of a large Fed rate-cutting program.

(New York)

One of the big developments of this month is not just that stocks have been getting hammered, but that bonds are too. While yields have stagnated from their jump a couple weeks ago, bond funds are seeing major outflows. In fact, investors are withdrawing so much capital from bond funds that it is likely to be the worst month for outflows in the last three years. Through October 19th, investors had pulled almost $25 bn from mutual funds and ETFs that invest in bonds. The losses break 21 straight months of inflows.

FINSUM: A couple things to note here. Firstly, considering Treasuries started the year yielding 2.4% and are now at 3.13%, one month of outflows does not seem too bad. On the negative side, however, it is worrying that bonds are seeing major outflows at the same time as stocks are losing in a big way.

(New York)

Whether you like it or not, the next recession is on its way. The big question is how long until it arrives. Most estimates range from 6-24 months, but most agree we are coming to the close of a very productive economic and market cycle. So what is the best way to prepare your and client’s portfolios for a downturn? The answer may be unconstrained bond funds, such as the Loomis Sayles Bond fund. Unconstrained bond funds, which can invest in any type of fixed income instrument in any geography, have done quite well this year compared to other areas of fixed income. Some funds are focusing much more on shorter term corporate credit, rather than rates, to greatly lower their interest rate risk.

FINSUM: Unconstrained bond funds seem like a good way to get some solid yields while also protecting against big losses. We think short-term Treasuries and investment grade are good choices, but are wary of longer-term sovereign bonds and junk bonds right now.

(New York)

With stocks riding so high and anxiety building about a potential downturn, espousing and building a robust bond strategy is going to be more important than ever. With that in mind Barron’s has put out four bond funds picks for 2018. The picks are the Vanguard Tax-Exempt Bond Index, the Artisan High Income fund, the Prudential Short Duration Muni High Income, and the Dodge & Cox Global Bond.

FINSUM: The Vanguard fund really caught our eye. It has an expense ratio of 0.19% versus an average of 0.8% for its peers, and has more than $190 bn under management, with a lot of expertise managing it.