Displaying items by tag: yields

(New York)

Junk bonds have been riding the rally like many other financial sectors…see the full story on our partner Magnifi’s site

(New York)

Yields did something very alarming today: they shot up to their highest level in two weeks as a kick-off to summer trading. Yield rises were the epicenter of all the volatility a couple of months ago, and have been the key driver of stock returns as they are the primary asset for pricing inflation risk. So the big question is where will they go from here?

FINSUM: Inflation fears have calmed, but commodities prices are still keeping those worries alive. The Fed seems to hold the key to the whole issue. As long as it walks the line that inflation is transitory, and data at least marginally backs that up, the market will be fine. But if we get a couple suspect reports, and a bad headline or two, all exacerbated by an off-the-cuff Fed remark, we could easily stumble into a correction.

(New York)

Inflation worries may have surged this Spring, but that has not helped real yields. When you compare the yields of stocks and bonds versus inflation, the truth is that real yields have turned negative. It is unusual for the S&P 500 to have a negative yield, which is currently at -0.81%. That is slightly better than 10-year Treasuries’ real yield of -0.87%. This has usually spelled trouble historically. Going back to 1970, there has only been one instance when the market did not decline at least 32% in the two years following the point at which yields went negative.

FINSUM: This is a pretty scary statistic, but then again, most historical contexts don’t involve a pandemic-induced country-wide shutdown and unprecedented government stimulus.

(New York)

The whole market—including advisors—has pretty much been panicking lately about to invest in what could be a period of high inflation. The duress is understandable considering we haven’t had significant inflation in decades. However, those trying to diversify into assets which are likely to thrive during inflation should look no further than the SPDR S&P Regional Banking ETF (KRE). The normally sleepy sector is surging this year, up 37% versus the S&P 500’s 11%. The reason why is simple: higher rates mean better earnings for banks, which earn the majority of the revenue from interest income.

FINSUM: If you think inflation is going to stay elevated, this is a great hedge. However, if it falls, it is easy to imagine regional banks tumbling in value.

(Washington)

The muni market has been heating up with a huge influx in cash and stimulus. Additionally, as concerns grow…see the full story on our partner Magnifi’s site