Displaying items by tag: bonds
High yield bonds are in an interesting place. After yields fell very low during the core of the pandemic, the bonds looked relatively less attractive. Now, jumping Treasury yields have hit the asset class, but junk credit is relatively less affected because of its shorter maturities and higher yields. The reality though, is that even with things starting to look better given the recovery in the economy, it is a risky time. Therefore, junk debt is an area where active management might be the right choice. Individual credits can react very differently to market forces, and it takes a good deal of research to really understand the companies.
FINSUM: High yield managers are known for resisting the excesses of their asset class, something that index funds cannot do. Therefore, in risky times, it might be a good idea to stay active.
Even before the pandemic and subsequent crisis, the high-yield Muni market failed to deliver the returns after taxes that the corporate bond market…view the full story on our partner Magnifi’s site
Bond market investing hasn’t seemed so attractive recently as rates on even long-term government debt such as the 10-year Treasury hit lows…view the full story on our partner Magnifi’s site
If investors’ eyes are watering from the big jump in yields over the last month, no one could blame them. The steep rise has sideswiped markets and until today, sent the Nasdaq into a full blown correction, with the rest of the market down strongly too. So how can investors protect their portfolios from losses because of yield jumps? One asset class to consider are rate hedged ETFs, such as the ProShares Investment Grade-Interest Rate Hedged ETF (Cboe: IGHG) and ProShares High Yield Interest Rate Hedged ETF (Cboe: HYHG). Both funds go long corporate bonds and short Treasuries, which allows them to remove rate risk, but still keep the benefit of income streams from the underlying corporate bonds.
FINSUM: Rates usually rise when the economy is improving, as is happening now. In these periods, corporate bond spreads usually tighten. So this type of ETF allows you the benefit from the increasing attractiveness of corporate bonds while also protecting against interest rate risk.
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.