Displaying items by tag: Treasuries

Monday, 22 March 2021 16:59

The Great Migration Within Bonds

(New York)

There might be a great migration in the cards for bonds. While many have spoken of a broad migration into equities that occurred over the last year, a smaller scale change might be about to occur within bonds. Treasuries have been getting hammered, and corporate bonds are appearing increasingly attractive to investors for a number of reasons. Firstly, their durations tend to be much shorter, meaning they have significantly lower interest rate risk—crucial right now. And secondly, with the economy picking up, earnings and business health are looking brighter and brighter.


FINSUM: Aviva Investors thinks corporate bonds have a nice pathway to gain. While rates are working against corporate bonds, the fundamentals are strong. If yields finally stabilize under 2%, it is easy to imagine investors piling into corporate bonds as the recovery strengthens.

Published in Bonds: IG
Tuesday, 16 March 2021 18:41

How to Hedge Against Rate Risk

(New York)

Yields have been moving all over the place. And while there are daily moves higher or lower, there is a definitive bias towards sharp moves upward. Accordingly, investors need to be thinking about rate hedging. Investors are in a tough place as Treasury yield rises have been causing losses, but the bonds themselves still don’t have high enough yields to be attractive. With that in mind, there are a couple ways investors can go about protecting themselves. Firstly, they can buy floating rate bond-focused ETFs, which give protection but have very low yields. The other opportunity is to buy into bond funds that access riskier corners of the markets, where yields are much higher and durations are shorter, giving less rate sensitivity.


FINSUM: Our favorite ETFs for this purpose are from ProShares, specifically IGHG, which hedges rate risk but still offers the yield income.

Published in Bonds: IG

(New York)

The bond market is a powder keg that may have only started to explode, says ING. “The bond market has been sitting on a powder keg since last week. Attitude towards duration among fixed income investors has grown cautious, to put it mildly”, says Padhraic Garvey, regional head of research for the Americas at ING. “In this context, we do not blame investors for exiting at the first sign of a sell-off”, he continued.


FINSUM: Investors are currently terrified about inflation and it is hitting Treasury yields and tech stocks squarely on the chin. Our opinion is these fears are overblown and this is a market overreaction, especially as it regards tech stocks. These stocks are losing despite the fact that underlying fundamentals strongly favor the growth of tech earnings.

Published in Bonds: Total Market
Thursday, 28 January 2021 14:55

Get Ready for a Very Different Treasury

(Washington, D.C.)

Yellen, former chairmen of the Federal Reserve, was confirmed by the Senate in her nomination for secretary of the treasury. The 84-15 vote reflects both Republicans willingness to work with the Biden administration on economic issues, and Democrats desire to brand their own economic reactions to the covid crisis. Yellen, previously at Brookings Institution, has a decorated history in public service working for Clinton administrations council of economic advisors, CEO of San Francisco regional federal reserve bank, and chair of the Federal reserve. Yellen faces many challenges in her role as treasurer both with the current state of the economy and the looming U.S. debt. Yellen plans to work closely with current Federal Reserve Chairman Jerome Powell to address the U.S. economy.


FINSUM: Yellen historically is known for reading the economy through the lens of the labor market, so expect her policy guidance to be especially informed through a variety of labor market indicators. Additionally expect Yellen’s policy to be more expansionary than a previous administration, but she is weary of the U.S. current debt and has denounced the large deficits supported by Modern Monetary Theory.

Published in Bonds: Treasuries

(Washington)

The market has been increasingly betting that Biden is going to win the election, but there is still a great deal of uncertainty. The outcomes seem like almost diametrically opposed routes for the country, and accordingly it feels like many asset classes could head in opposite directions depending on the outcome. With that in mind, Savvas Savouri of ToscaFund Asset Management, has published a very interesting and clear diagram explaining how each asset class will react to either a Trump or Biden win (see above). The most interesting thing about this is how similar the response will be across several asset classes. For example, no matter who wins, it appears likely that commodities, gold, US domestic staples, and exporters will gain, while in either scenario, Treasuries, REITs, and the Dollar will lose.


FINSUM: This is an excellent diagram that gives a concise view on how things may change following either a Biden or Trump victory. Two things jump out to us here. Firstly, that tech shares look likely to lose if there is a blue wave; and secondly, that the Dollar is headed down in either outcome, so exporters are likely to do well. It is easy to imagine that a blue wave would result in a broad rally of the S&P 500 that is not led by tech.

Published in Eq: Tech
Page 8 of 28

Contact Us

Newsletter

Subscribe

Subscribe to our daily newsletter

Top
We use cookies to improve our website. By continuing to use this website, you are giving consent to cookies being used. More details…