Displaying items by tag: bonds

Inflation is picking up as PCE and CPI numbers are setting decade-long records, and the Fed is rapidly trying to regain control. The American people are beginning to show signs of angst as 65% of American’s say that Biden’s admin has not put enough attention on handling inflation and almost 60% say the same thing about the economy. This comes a swathe of low approval rating numbers come in where he has fallen almost 20 percentage points all the way down to the low 40’s. Overall about half of Americans say they feel frustrated and disappointed in the Biden admin. Biden’s focus has been on a series of regulatory and economic-centered packages, and many American’s don’t feel he is focusing on the issues they ‘don’t care about’.

FINSUM: Biden should stop pushing for another big fiscal package immediately if he has any hopes of reigning in inflation in 2022.

The bond market blues have been difficult as rising rates have started to really deflate a lot of funds. However, active bond funds have had an edge because not been pegged to indices they have freely navigated to localized emerging market debt. From HSBC to BNP many of the largest funds are buying up localized EM debt because many of these countries’ central banks tightened monetary policy last year and the rate hikes are already built-in. So as bond prices go down in the U.S. and inflation risk remains high, hawkish central banks in Russia, South Africa, Indonesia, China, and South Korea have all soured because localized currency means higher real payout and with relatively lofty interest rates the funds have a more promising horizon.

FINSUM: 12-Months ago the U.S. was looking at Emerging Markets as crazy for tightening the belt too quickly, but now these emerging markets are ahead of inflation and their bonds are soaring.

If the treasury market isn’t upside down it’s certainly moving there. Yields are rising which means prices are falling. The worst part is with inflation picking up there is a lot of room to move in longer-term treasury bonds. So where should investors turn to? Fallen angel bonds and their associated funds. Fallen angels are investment-grade bonds that have been recently downgraded to junk status. The biggest benefactor is that these relatively riskier bonds have a way higher return but there is less interest rate pass-through. That means as the Fed begins to strangle the government bond market the lower-grade corporate bonds won’t feel much of the pain. Many of these corporations have relatively strong balance sheets and the risk is overblown, so profits can recover quickly.

FINSUM: The fallen angel fixed income ETF market has an incredible yield advantage, and there is so much fiscal and monetary support that the risk is probably smaller than the yields are saying.

hroughout 2021 one of the biggest worries for investors, business owners, and policy makers has been the return of inflation. Long dormant, inflation has surged as markets and economies recover from the COVID-19 pandemic ... [Read More]

Investors have been wary of tech stocks as of late and instead are parking their money in investment-grade corporate bond funds. This week the sector garnered a whopping $2.9 billion in inflows which is the biggest week since July, over six months ago. Markets are expecting the Fed to hike this year, which means borrowing rates will start to hurt the growth-oriented stock, and the Nasdaq slumped to its worst start since 2008 as a result. However, the rising yields are also pushing more investors into relatively riskless corporate debt. Junk bonds didn’t get the same bump as many indices were down with a hawkish Fed.

Finsum: Don’t sell on tech stocks just yet, but it could be a bearish year for the number one market segment the last year if the Fed hikes four times!