Displaying items by tag: bonds

Investors remain concerned about how inflation could affect their portfolios. Despite the Federal Reserve's efforts, inflation remains elevated, making it a good time to consider adding inflation hedges to your investments. Here are three top inflation hedges to protect your portfolio:

1. TIPS (Treasury Inflation-Protected Securities): These U.S. government bonds adjust their interest rates with inflation, providing a reliable safeguard for bond investments.

1. Floating-rate bonds: These bonds adjust their payouts with rising interest rates, offering protection against inflation. You can access them through ETFs or mutual funds for added diversification.

1. Real estate: Investing in a house with a fixed-rate mortgage can hedge against inflation. If a house directly isn’t possible SFR or REITs are great options. 

Avoid long-term fixed-rate bonds and cash savings as they lose value in real terms during high inflation.

Finsum: Inflation still remains above the official Fed target and with a potential slew of cuts coming, inflation could spark again. 

Indian government bonds have been added to the JPMorgan GBI Emerging Market Global Series Index for the first time, reflecting a milestone for Indian markets. The move follows the RBI's 2020 decision to remove foreign investment restrictions on specific rupee debt.

Starting June 28, 27 Indian G-secs are now open to non-resident investors under the Fully Accessible Route, boosting their market presence. These bonds, with the longest duration in the index and a yield of 7%, present a significant opportunity for global investors. 

This inclusion is expected to raise foreign ownership of Indian government debt from 2% to 4.4% and may lead to further additions in other global indices.

Finsum: Investors might start flocking to EM as rates fall in the west. 

Goldman Sachs exceeded profit and revenue estimates with $8.62 earnings per share and $12.73 billion in revenue, driven by strong fixed income results and reduced loan loss provisions. The bank’s Q2 profit surged 150% to $3.04 billion compared to the previous year. 

Fixed income revenue rose 17% to $3.18 billion, while provisions for credit losses fell significantly. The asset and wealth management division saw a 27% revenue increase, and platform solutions revenue rose 2%.

However, investment banking fees were slightly below expectations, unlike rivals JPMorgan and Citigroup. Shares of Goldman Sachs increased by more than 1% in midday trading.

Finsum: This is evidence of the good climate for fixed income markets during extreme economic stress. 

Bond investors should closely monitor their allocation and management strategies, given the current favorable real Treasury bond yields above 2% and even higher yields on investment-grade bonds. 

Bonds are now competitive with other asset classes, a situation not seen in decades due to historically low central bank policy rates. Despite this, many investors continue to neglect their bond allocations, possibly due to poor returns over the past decade. Passive bond index funds and ETFs, like the Vanguard Total Bond Market II Index Fund and iShares Core U.S. 

Aggregate Bond ETF, have gained popularity but may not align with all investors' objectives. Active bond management, which can better match investment goals and risk tolerance, often outperforms passive strategies even after fees. Investors should consider a more active approach to bond investing to optimize their portfolio performance and risk management.

Finsum: A rate cut seems more likely given the economic outlook and investors should plan accordingly

When considering fixed income ETFs, active strategies offer notable advantages over passive ones. Unlike equity indexes, replicating a bond index like the U.S. Agg is "impossible" due to smaller bond quantities, infrequent trades, and varying maturities and credit ratings.

 Active management allows flexibility to adapt to shifting bond markets and interest rate environments. The T. Rowe Price QM U.S. Bond ETF (TAGG), for example, charges eight basis points and seeks to outperform the U.S. Agg through a diverse range of investment-grade U.S. bonds.

 As fixed income ETFs grow in popularity, active strategies present a valuable alternative. This trend reflects a broader move towards active management within the ETF space.

Finsum: When thinking about the advantages of active bonds its important to consider this index replicability that you can’t get in fixed income.