Displaying items by tag: bonds

Sunday, 30 October 2022 09:04

A rebalancing act

Stocks and bonds during the first half of the year?

Kerplunk. Scientifically speaking, of course.

That’s where balancing could come in handy, according to morningstar.com. Investors who abided by strategy dictated by discipline wouldn’t have taken as big a hit, according to morningstar.com.

Of course, rebalancing doesn’t come with any guarantees when it comes to generating an improvements on returns, results this year show why maintaining a tight rein on risk isn’t such a bad idea.

As an investor, whether you’ve been around the block a few times or are wet behind the ears, your priorities probably vary widely, according to smartasset.com.

Thinking about building a portfolio from scratch? Well, you might want to try this instead: you’ll be assigned a pre built model portfolio by many advisors.

Also consider that most investment advisors keep close tabs on and review their model portfolios to make sure they’re achieving their benchmarks and doing their thing at level that are proper. But that doesn’t happen at the snap of a snap of the fingers; instead the process entails rebalancing each portfolio, which your ability to maintain the asset allocation that was designated.

Published in Bonds: IG
Thursday, 27 October 2022 12:11

Quantitative Tightening Adding to Volatility

Yields on developed market government bonds have been soaring this year, as a result of higher inflation, sharp rate hikes, and quantitative tightening. The latter of which is what has traders nervous right now. The Federal Reserve is looking to increase the pace of winding down its nearly $9 trillion balance sheet, while the European Central Bank has also been looking to shrink its €5 trillion bond portfolio. Central banks built up their balance sheets with bond purchases to help provide a stimulus for the economy, but with the current high inflation, banks are now looking to sell those bonds. With the bond market already facing pressure due to the rate hikes, further quantitative tightening could make trading even more difficult by worsening liquidity and increasing volatility. The Bank of England has already been forced to delay its quantitative tightening due to turmoil in the UK bond market. That turmoil, which also spread to the U.S. and European bond markets, has only added to the liquidity and volatility concerns.

Finsum:An increase in Quantitative Tightening by central banks could lead to more volatility in the bond markets.

Published in Wealth Management
Tuesday, 18 October 2022 04:17

Bond Volatility at Peak Pandemic Levels

According to an index that measures Treasury market volatility, bond volatility is at a level not seen since the peak of the COVID market crisis in March 2020. This is a worrisome sign that the Treasuries markets, which are considered a safe haven for investors, are not functioning as they should. For context, the biggest one-day move for the benchmark 10-year Treasury in 2021 was 0.16. This year, there have been seven days with larger moves. Liquidity is evaporating, which has caused the soaring volatility. A Bloomberg index is currently showing that liquidity in the Treasury markets is worse now than in the early days of the pandemic, while implied volatility, measured by the ICE BofA MOVE Index is near its highest since 2009. This is coming at a time when Bloomberg News reports that the largest buyers of Treasuries, including Japanese pensions, life insurers, foreign governments, and US commercial banks, are pulling back at the same time. Even Treasury Secretary Janet Yellen has expressed concern about a potential breakdown in trading, saying that her department is “worried about a loss of adequate liquidity” in the US government securities market.

Finsum: A lack of liquidity and a pullback in large-scale treasury purchases has triggered volatility not seen since March 2020.

Published in Bonds: Treasuries

Few probably are pounding away for a repeat performance of the bond markets in the first half of the year. But an upbeat perspective among investors is warranted, according to corporate.vanguard.com. And, why, pre tell, is that? Bonds are on the precipice to dispense a spike in real income and restart their role of diversifying portfolios.

Even so, however, the road ahead is sprinkled with a plethora uncertainties and variables. The upshot: among other things, for another season, inflation seems bound to remain abnormally high.

At the same time, unlike the recent past, corporates, municipals, high yield, and emerging markets pose plenty of chances for growth.

Bloomberg Barclay’s US Aggregate Bond Index plunged 8.8% since January, according to fidelity.com. That was its steepest drop off in 40 years. What’s up? Investor trepidations over rising interest rates and the fear it could put a dent in the price tag on bonds. That usually translates into a drop in bond prices and rising bond yields.

However, it also could be where opportunity knocks. The Fed’s plan to revert rates to “more historically normal levels” could tee up a chance in bonds for may of those with an eye on income, principle protection and diversification in the second half of the year and more.


Published in Bonds: High Yield
Tuesday, 23 August 2022 02:17

BlackRock Furthers Fixed Income Innovation

BlackRock launched a new series of fixed-income ETFs which allow access to buy-write investments on bond securities. iShares 20+ Year Treasury Bond BuyWrite Strategy (TLTW), Shares High Yield Corporate Bond BuyWrite Strategy ETF (HYGW), and the iShares Investment Grade Corporate Bond BuyWrite Strategy ETF (Cboe: LQDW) are all different variations of the new options available to investors. BR says buy-write strategies have been available to equity ETFs for a long time, but have not infiltrated fixed income. These options will give more exposure to yield in what has been one of the most difficult times for fixed-income investment in decades. This just adds to BR’s legacy of innovation and creativity in bond market ETFs.

Finsum: This is an interesting idea, and maybe if inflation is cooling quicker than expected bonds are too cheap. 


Fixed Income ETF: Bonds, Total Market, ETF, Treasuries

Published in Bonds: Total Market
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