Displaying items by tag: fixed income

With bond mutual funds experiencing record losses this year, many investors are headed for the exit. But most are not leaving fixed income altogether, they’re just swapping mutual funds for ETFs. The main reason is taxes. Many investors are selling positions in bond funds and putting the cash into similar ETFs to harvest tax losses. According to The Wall Street Journal, “This year is shaping up to be the biggest 'wrapper swap' on record.” About $454 billion has been pulled from bond mutual funds, while $157 billion has flowed into bond ETFs through the end of October. According to macro research firm Strategas, it would be the largest net annual swap to ETFs by a wide margin.” Todd Sohn, ETF strategist at Strategas stated, “The Fed is at its most aggressive in 40 years. Along with inflation, that has absolutely crushed bonds. It’s set off the acceleration of wrapper swapping that we have seen in equities for a while. Now we’re finally getting it in bonds.” Many of these swappers are also taking their money out of mutual funds that hold riskier bonds and putting them into safer Treasury ETFs.

Finsum:With the bond market experiencing its worst year since 1975, bond investors are trading mutual funds for ETFs at a record pace.

According to the results of a recent survey, fixed-income investors want more ESG data than what is currently available. A survey of 111 senior buy-side fixed-income investors, which was conducted by analytics firm Coalition Greenwich, found that 90% believe ESG is important to decision-making, but only a third have fully integrated ESG into their risk analysis. The reason for the large difference is a lack of ESG data. Coalition Greenwich’s senior analyst Stephen Bruel stated “It boils down to risk management. If you don’t have reliable ESG data about an issuer or issuance, then it’s harder to calculate what the negative consequences might be.” More than half of the respondents said it was “important to incorporate ESG in fixed-income portfolios to perpetuate corporate values,” but there’s a “gap between where the survey participants want the industry to be and where it actually is.” Data was listed as the largest obstacle to achieving these ESG goals. The concerns about ESG data quality included greenwashing and inconsistent ratings. Essentially, if the data isn’t reliable, then quantifying risk becomes harder, which could open up investors to sizeable losses. This is especially true with the calculation of climate risk, which would certainly benefit from more data.

Finsum: Based on the results of a recent survey, fixed-income professionals believe ESG is important, but a lack of data is preventing more of them from implementing an ESG strategy.

You go, ETFs. More and more, they’re a key component in the evolving fixed income terrain, according to insuranceaum.com. That tidbit surfaced in a survey of 700 institutional investors and investment decision makers.

The download on ETFs: 

• Being leveraged for portfolio construction – and that includes non-core allocations
• Playing a liquidity role as investors step up allocations to non-liquid sources of income
• Helping to facilitate the internalization of fixed income management
• Enabling investors to implement, with precision, ESG objectives

Meantime, the New York Stock Exchange’s not only about the peaks and valleys of the market.

And, hey, who doesn’t need a respite from that maddening merry go round?

Assets under management in fixed income ETFs swelled from $574 billion in 2017 to $1.28 trillion last year, according to data recorded by the exchange, reported ssga.com. Wait, there’s more: during the same timeframe, the number of funds leaped from 278 to almost 500.

Jump starting the juices on current income is the primary intent of ETF’s, according to entrepreneur.com. The story appeared originally in Stock News. Capital appreciation’s a secondary objective. The fund’s hopping, too, with $4.78 billion in assets under management, not to mention 1307 holdings.

Someone: please pass the Tylenol. Come to think of it, you might want to pop one yourself.  

Either way, fixed income investors thank you.

After all, their mantra this year…waiting…waiting…“pain to gain,” according to advisorperspective.com.

Feel free to dry swallow the thing.

Anyway, precedent making losses are making their mark in traditional fixed income benchmarks, opening the door to an environment that’s done anything but double clutch when it comes to investment grade, core fixed income dispensing yields in the mid single digits. 

And talk about bitter cocktails. The drop off in fixed income coupled with the turn south in equities has culminated in questions among investors associated with their bond portfolio. Down the road, what – if any – benefit bonds can yield.

In fact, fixed income’s enduring its nastiest year in a generation, according to investmentweek/co/uk. At the core of the sell off; ta da – the global government bond market.  

Now, with opportunities sneaking over the horizon, investors have a strategy for approaching the asset class, they told Investment Week.  

The $4 trillion municipal debt market is expected to have a “bounce back year” in 2023, according to Charles Schwab’s Cooper Howard. The director and fixed-income strategist for the Schwab Center for Financial Research said in a recent Bloomberg TV interview that “A slower pace of interest-rate hikes, attractive yields, and relatively healthy state and local government finances should lure investors back after demand plunged this year.” He also stated “Credit quality is very high in the municipal bond market. State and local revenues have surged to record-level highs driven by the economic recovery. Given the rise in yields, it is more attractive for retail investors, so there will be more demand coming into the market.” Munis had fallen out of favor due to a combination of inflation and recessionary concerns. According to data compiled by Bloomberg, muni sales are down nearly 19% this year at about $351 billion. However, 10-year municipal yields have more than doubled since the start of the year. While recessionary fears may continue, the municipal market won’t be as affected due to healthy credit ratings. Howard expects municipal debt tied to public transportation to lead the rebound as the airline industry is bouncing back.

Finsum:Schwab strategist Cooper Howard predicts a bounce-back year for munis due to slow rate hikes, attractive yields, and healthy credit in state and local governments.