Displaying items by tag: yields
Markets are in turmoil which has investors looking for more secure options, but American bonds are a risky option with rising yields (falling prices), which means active international is in a good position. Over the last year, 82% of active bonds have outperformed, and while that doesn’t hold up in the long run the unique conditions put them in a good position. International bonds can offer less interest rate risk, already better yields, and comparable credit profiles. The added advantage of international active funds is investors can make hedges with currency trading which can allow investors to hedge or leverage for more potential gains.
Finsum: The Fed will continue to put pressure on both bonds and equities in the U.S., and investors need a backup plan.
It's never too early to begin thinking about tax-loss harvesting and there is a ripe situation in the bond market. The yield curve has been on the rise due to Fed tightening and inflation. Rising yields mean lower bond prices and ETF owners have taken a bath. Selling off those funds right now could give you a tax advantage later this year. However, investors should get out of the fixed income route altogether. Markets are beginning to show signs of a recession or straight volatility so replacing your bond ETF with another fixed-income ETF could help in the case of a recession. Or if bond prices begin to take off it's a good option to have some skin in the game.
Finsum: The wash rule makes harvesting losses in equity markets a bit difficult, but the plethora of bond funds and options gives investors better ability to harvest losses now.
The bond market has taken a beating and investment-grade debt has been anything but a safe haven for income investors. This has been one of the third-worst stretches in history as the YTD returns have been -10.5% which is only bested by the Lehman collapse in late 2008 where returns crept to -14.3% and Volcker’s days of battling high inflation and hiking rates. Investors are selling off investment-grade debt as the risk-free rates on Treasuries are climbing as the Fed’s tightening cycle is beginning. These rising yields are all corporate bond ETFs and driving returns down, but things could get worse as rates will only continue to rise and inflation is only beginning.
Finsum: Income investors need to look to active funds or abroad if they want relief in the bond market.
Not all REITs are created equally, and many have been pumping out dividends and will come to a screeching halt as the Fed begins to hike interest rates. However, three REITs are in a good position to show dividend resilience to the interest rate risk. The First is Medical Properties Trust which is a healthcare REIT that has three developing investments to create flows for dividends. VICI Properties is up next which is acquiring MGM Growth Properties and has a very low debt to EBITDA ratio which will help in securing dividend payouts. Finally, a long-term strategy is the 1st Street Office which has a consistently high dividend and shares are tied to its NAV.
Finsum: Rate hikes are slow to affect real estate compared to other assets, but aggressive hikes could move quicker.
The muni market has seen sky-rocketing volatility the last ten days with the highest point since the onset of the pandemic. That volatility has hurt many investors as yields rose by over 11 basis points sending bond prices tumbling. Triggering this decline in muni bond prices was Fed Chair Powell’s hawkish turn which included tapering asset purchases and raising rates. This loss is positioning munis for their worst quarter in almost 30 years. Some muni bond issuers are pausing or flat out canceling their development in the wake of a flat out crisis.
Finsum: This could be a quarter for muni bonds which have a close pass through to the Feds target interest rate and are therefore more sensitive.