Bonds What You Need to Know
About Bond Yields to Determine Your Returns Current yield is simplistic to calculate, but other measures of yield can help you make better investment decisions.
Have you come across anything recent
about bond yields rising?
Not exact matches
«Do you really want to take a 2.5 % annual return for 40 years, if you're thinking
about current
bond yields?
The
yield on Canadian 10 - year federal government
bonds have climbed to
about 1.6 % from
about 1.3 % on Election Day.
So, when an economist or
bond fund manager makes an accurate forecast
about Treasury
yields, his or her clients are probably doing very well.
The JPMorgan Emerging Markets
Bond Index Global, a U.S. dollar - denominated index of 65 emerging - market countries,
yields about 5 %.
On Wednesday afternoon, the benchmark U.S. 10 - year
bond was
yielding 2.35 per cent, up 15 basis points from before the Fed statement and up sharply from
about 1.6 per cent at the beginning of May.
In addition to the aforementioned concerns, Golub noted fears
about whether economic growth won't meet lofty expectations and signals being sent from the
bond market, where a narrower gap between government
bond yields is kindling fears that a recession is looming.
When we talk
about bond market liquidity it's important to understand that there are lots of different «pools» out there such as high
yield bonds, munis, government
bonds, etc..
While I don't presume to read traders» (or trading computers») minds (see Barry ritholtz» note this morning
about ex post facto rationalizations), generally speaking there is concern that the «taper» of long term
bond purchases will cause
bond yields (the percent of interest paid on them) to rise.
Gundlach predicts that both high -
yield bonds and a portfolio of mortgage - backed securities could return
about 6 percent in 2013.
Total issuance of leveraged loans and high
yield bonds is down by nearly $ 140 billion this year compared to 2014, to
about $ 575 billion.
NEW YORK, Jan 18 - U.S. fund investors pulled $ 3.1 billion from high -
yield «junk»
bonds during the latest week, Lipper data showed on Thursday, offering new warning signs
about risk appetite despite global markets» continuing triumph.
April 25 - Dow Jones Industrial Average futures erased losses on Wednesday after Boeing reported strong results and forecast, but concerns
about rising U.S.
bond yields and corporate costs continued to weigh on U.S. stocks.
RATES STILL LOW: Even as concerns
about rising
bond yields and interest rates spook some investors, bulls are quick to mention that rates are rising off extremely low levels.
The SPDR Barclays High
Yield Bond fund gathered more than $ 1.1 billion, or
about half its total for the year, while the iShares iBoxx $ High
Yield Corporate
Bond took in $ 603 million, pulling it out of negative territory for the full year.
Although it is fair to say that the recent uptick in volatility has in part reduced earlier concerns
about prolonged low volatility and associated reach - for -
yield behavior, it has placed added focus on the resilience of liquidity, particularly in markets, such as the market for corporate
bonds, that may be prone to gapping between liquidity demand and supply in stressed conditions.
Bonds flipped between negative and positive territory as concerns
about economic growth pushed the 10 - year note
yield to lowest level since April.
There's reason to be concerned
about bond vigilantes, who are no longer under «lock and key» and are free to push
yields higher, Wall Street veteran Ed Yardeni told CNBC on Friday.
Treasury
yields edge lower on Thursday, with the 10 - year government
bond hanging around its lowest level in
about seven weeks
That certainly was the market reaction this morning, as the 10 - year
bond yield spiked on the report, suggesting concerns
about future inflation and a more aggressive rate - hike schedule at the Fed.
When
bonds yield 1.75 % for investment - grade
bonds, then it's difficult to turn that into a 5 % -10 % return going forward... If he wants to argue against that, and talk
about Dow 5000 and bear and bull markets, then he's welcome to, but he's pushing at windmills in my opinion, and he belongs back in his ivory tower.
The $ 1.2 trillion market for U.S. junk
bonds yields about 6.6 percent, double what's offered by higher - rated company debt, according to Bank of America Merrill Lynch index data.
Also, here's a good one on the potential for lower
bond returns using a historical period for the lower
yield environment you talked
about:
Because most wealthy Chinese seem to think
about RMB in terms of USD or Hong Kong dollars, it is the fear that any depreciation of the RMB against those two currencies (the Hong Kong dollar is pegged to the USD through a modified currency board) greater than the couple of percentage points interest rate differential would
yield less than equivalent USD or Hong Kong dollar
bonds.
Global
bond yields have declined significantly in recent months, but at a pace and uniformity that suggests either a climax in
yield - seeking or growing concerns
about economic weakness.
Ford O'Neil, who oversees
about $ 100 billion in
bonds for Fidelity Investments, says the sharp run - up in
yields since the election of Donald Trump may not be justified.
Bloomberg reported Thursday that after Draghi's bold words
about protecting the euro last week, markets expect him to deliver some sort of drastic action to do so and to relieve pressure on
bond yields, which have climbed steadily higher for Spain and Italy.
With market volatility hitting multi-decade lows, junk
bond yields also at record lows, the median price / revenue ratio of S&P 500 constituents at a record high well - beyond 2000 levels, and the most strenuously overvalued, overbought, overbullish syndromes we define, I'm increasingly concerned
about the potential for an abrupt «air pocket» in the prices of risky assets that could attend even a modest upward shift in risk premiums.
Quality, five - year corporate
bonds are
yielding about 2.4 %.
Japanese shares hit a two - month closing high on Tuesday with financials leading gains after U.S.
bond yields spiked to four - year highs and as investors remained optimistic
about upcoming earnings.
Today, those
bonds yield just over 3 %; the 10 - year Treasury currently generates
about 2.3 % (source: Bloomberg, as of 10/19/2017).
Fears
about inflation and spiking
bond yields caused an earthquake on Wall Street in early February.
The spread between Australian and US
bond yields has contracted from nearly 450 basis points at the beginning of the 1990s to an average of
about 25 basis points more recently.
This has been particularly important in bringing
about the sharp convergence of
bond yields that we have seen around the world over the past few years (Graphs 3 and 4).
I slowed my municipal
bond purchases because the 10 - year
bond yield edged down to
about 2.15 %, which made
yields unattractive.
Which explains why
yields on two - year government
bonds in Canada have surged in recent weeks and are now at
about parity with the U.S.
When I was a junk
bond trader in the 1990's, high
yield money would be pulled from the market abruptly and quickly, usually
about a week before the stock market would undergo a big sell - off.
Yet we also see very strong inflows into junk
bond funds, based on the belief that these high
yields represent value rather than information
about default probabilities.
I've noted that the upward spike in
bond yields in recent months was based not on information
about an economic recovery, but merely reflected a normalization of maturity risk premiums.
For intermediate - and longer - term
bond yields, it's all
about inflation and growth expectations.
People need to pay attention to the 10 - year
bond yield as it is signaling something negative may be
about to happen in the equities market here.
However, the reaction of the
bond market is another story altogether, with
yields on 10 - year Treasuries recently returning to
about where they were when this year began.
The BofA Merrill Lynch high -
yield index is trading at roughly 600 basis points versus government
bonds, but if energy, metals and mining is excluded, it's
about 80 basis points less in terms of spread.
About 30 % of the development market government
bond universe already carries a negative yield, according to the JP Morgan Global Developed Government Bond In
bond universe already carries a negative
yield, according to the JP Morgan Global Developed Government
Bond In
Bond Index.
My California muni
bond positions are up ~ 3.5 % + ~ 4.5 % gross adjusted
yield for a total gross gain of
about 8 %.
Concerns
about the divorce between
bond prices and economic reality no doubt help explain the gyrations in European
bond yields.
Contrast that to the S&P 500, which
yields just a fraction of a percent less than the
bond and we expect will grow earnings at
about 6 % per year for the next five years.
Oh an anyone retiring whinging
about low
bond yields can stop right now.
The 30 - year U.S. Treasury
Bond today
yields about 2.7 %.