While the underperformance of
high yield bonds since my post The Case Against High Yield has certainly made high yield bonds more attractive (yields went from sub 6 % to north of 8 %), I still prefer the risk / return profile of a stock / bond allocation (more here).
Not exact matches
The main stock index dropped by as much as 2.4 percent earlier, while the benchmark 10 - year government
bond yield rose to 6.944 percent, the
highest since August 2017.
That relationship has played out this year — as interest rates have risen
since January, the HYG
high yield corporate
bond ETF has come under pressure.
Typically,
higher interest rates make existing
bonds less attractive to buyers,
since they can get new notes at loftier
yields.
The
yield on the U.S. 10 - year Treasury jumped to its
highest level
since 2014 on Friday morning, underlining a wider move in
bond markets caused by central banks moving away from financial crisis policies.
Their declining currencies against the dollar (8 - 9 percent over the past 12 months), falling stock market values
since the beginning of the year and
high (India) and rising (Brazil)
bond yields are reflecting their funding difficulties.
In the meantime,
bond yields have drifted
higher and jumped shortly after 2 p.m. ET, finally pushing the 10 - year over 2.6 percent for the first time
since mid-December.
Bonds tumbled as upbeat consumer spending data lowered demand for U.S. debt, pushing the two - year note
yield to its
highest level
since 2011.
Rising inflation expectations in recent months have been reflected in U.K. government
bond (gilt) prices with the
yield on 10 - year gilts touching its
highest level
since April this year at 1.509 percent in Monday's session.
The market's price action
since late January hasn't been inspiring, and with
bond yields up, commodity prices
higher and sharp price moves among equities, it might be time to break out the bear suit.
The U.S. 10 - year Treasury
yield reached nearly 2.65 %, the
highest level
since 2014, as investors shunned
bonds amid expectations that the economy and inflation will pick up.
Cumulative inflows into the iShares Short Maturity
Bond ETF (NEAR), Floating Rate
Bond ETF, SPDR Bloomberg Barclays Short Term
High Yield Bond ETF, PowerShares Senior Loan Portfolio, and the Vanguard Short - Term Corporate
Bond ETF topped $ 400 million in total for the first session of the week, the
highest since the inception date of the most recent member of this product group.
China's one - year sovereign
bond yield has climbed 14 basis points
since the devaluation, while the cost to insure the nation's debt against default jumped to a two - year
high.
The iShares iBoxx
High Yield Corporate Bond (NYSEArca: HYG) reached $ 94.23 a share — its highest level since 2008 — while the SPDR Barclays High Yield Bond (NYSEArca: JNK) hit a two - year high of $ 41.05, says ETF Tre
High Yield Corporate
Bond (NYSEArca: HYG) reached $ 94.23 a share — its
highest level
since 2008 — while the SPDR Barclays
High Yield Bond (NYSEArca: JNK) hit a two - year high of $ 41.05, says ETF Tre
High Yield Bond (NYSEArca: JNK) hit a two - year
high of $ 41.05, says ETF Tre
high of $ 41.05, says ETF Trends.
Western allies press Trump to maintain nuclear deal with Iran: Reuters US intelligence monitors Iranian cargo shipments into Syria: CNN A trade war is a major risk for China's debt - ridden economy: CNBC Federal judge orders gov» t must accept new DACA immigration applications: WaPo Unification of Koreas still unlikely as leaders prepare to meet: Reuters US Consumer Confidence Index rebounded in April after March decline: CB New home sales in US increased to 4 - month
high in March: MarketWatch Richmond Fed Mfg Index turns negative for first time
since 2016:
Bond Buyer S&P Case - Shiller Home Price Index surged in Feb, up 6.3 % y - o - y: CNBC Federal Housing Finance Agency: US house prices continued to rise in Feb: HW Corp
bonds with lowest investment - grade rating look vulnerable: Bloomberg 10 - year Treasury
yield reaches 3.0 % for first time
since 2014: CNN Money
The leveraged loan market just achieved something it hasn't been able to do
since 2008 — moved within $ 100 billion of the U.S.
high -
yield bond...
Bond yields — from government to
high yield to corporates — have all fallen precipitously
since the financial crisis.
The 30 - year
bond yield TMUBMUSD30Y, -0.86 % added 3.3 basis points to 3.138 %, the
highest since March 9.
Toronto - Dominion Bank has lifted its posted rate for five - year fixed mortgages by 45 basis points to 5.59 percent as government
bond yields touched their
highest levels
since 2011 this week.
High Yield Bond Funds posted outflows for the 13th time in the past 15 weeks, with the latest redemptions the biggest
since early March, while Emerging Markets
Bond Funds recorded their largest outflow
since the second week of February.
High -
yield bond funds were down $ 5.3 billion, the eighth consecutive week of outflows and the longest streak
since the financial crisis in 2008.
Last week, the average
yield on corporate
bonds sat around its
highest levels
since January 2012.
The Treasury
yield curve has been steepening
since the election, with 10 - year
yields hitting one - year
highs in recent days amid a
bond sell - off.
High yield bonds have only been around
since the 1980s, so they've never really experienced a sustained rising rate environment.
Stocks and
bonds have been in a tug - of - war
since a blowout jobs report early this month sent Treasury
yields spiking, raising the specter of
higher interest rates to come.
It's also interesting to examine the changing significance and dynamics of the European
bond market in general, which has almost doubled in size
since 2005 to more than $ 10 trillion today, including government, investment - grade corporate debt and
high yield.
Currently, BBB - rated
bonds are equal to 45 % of the entire outstanding
high -
yield market, which has increased from 30 % a decade ago.3
Since BBB is the lowest investment - grade
bond rating, the risk is that many poor credits will fall, like angels, from the investment - grade into the
high -
yield universe.
Now,
since his stunning upset victory in the U.S. presidential election,
bond yields have spiked to their
highest levels
since last January, and many people are putting the blame on him for that.
High -
yield bonds have followed suit, hitting decade - tight levels in credit spreads in October, though they have widened slightly
since then.
Toronto — Dominion Bank has lifted its posted rate for five - year fixed mortgages by 45 basis points to 5.59 % as government
bond yields hit their
highest levels
since 2011.
Government
bond yields have surged
higher in Canada and the U.S.
since the summer, but that isn't equating too much for investors trying to generate income from their portfolios.
A
high -
yield bond fund run by BlackRock Inc. slumped on Thursday to its lowest level
since March, a day after Morgan Stanley warned a correction may already be underway.
With a normal
yield curve,
bond buyers essentially demand a
higher rate of interest in order to lend money for 30 years than they will to loan money for 30 days
since they will be locking up their money for a longer period of time.
Since interest income is taxed
higher than dividends or capital gains, a TFSA is an ideal place for
high yield bonds.
Government
bond yields have surged
higher in Canada and the U.S.
since the summer, but that isn't equating too much for investors trying to generate income from their portfolios.
The recent rebound in commodity prices has been good news for
high yield bonds, helping the sector (and credit overall) rally
since mid-February.
The S&P 500
High Yield Corporate
Bond Index performance behaved similarly returning 3.43 % for March, which was the index's largest return
since a 3.86 % return in October, 2011.
The par amount outstanding of investment - grade corporate debt, as measured by the S&P U.S. Investment Grade Corporate
Bond Index, has increased over USD 4 trillion
since September 2007, while the amount of speculative - grade outstanding, as measured by the S&P U.S.
High Yield Corporate
Bond Index, has increased by USD 800 billion.
They offer
higher yields than interest bearing cash accounts while still offering some safety,
since they mature within shorter time periods relative to other
bond variants, and have prices that are less affected by interest rate fluctuations.
The
yield on the benchmark 10 - year Treasury note climbed to 3.122 percent Thursday, its
highest market
since July 8, 2011, while the
yield on the 30 - year Treasury
bond hit 3.248 percent, its
highest level
since July 13, 2015.
Spreads (the difference between the
yield of a
high yield bond and a U.S. Treasury) have come in considerably
since the winter lows.
Starting in 2008 and into 2009,
high yield corporate
bonds (otherwise known as junk
bonds) saw huge drops in price under the premise the America was going to see a massive wave of corporate defaults, the likes of which we hadn't seen
since the Great Depression.
Indeed, the SPDR Barclays
High Yield Bond Fund (JNK) has been flashing warning signs
since January.
Investors seeking income can find stocks with reasonable
yield (not too
high,
since you do not want a
bond - equivalent) and good fundamentals.
Since high -
yield bonds have far more credit risk than government
bonds of the same maturity, investors should naturally expect
higher returns.
This fund has been around
since 2007, though it didn't start tracking the RAFI
High Yield Bond Index until last August.
Just as our fashion choices
since the 1980s have expanded beyond parachute pants, Member's Only jackets and Jordache jeans, the U.S.
bond market has markedly evolved with the growth of
high yield corporate
bonds, dollar - denominated emerging markets (EM)
bonds, asset - backed securities, collateralized mortgage - backed securities and more.
Looking at performance
since Sept. 30, 2015, the S&P 500
Bond Mega 30
High Yield Index outperformed and rose 28 %, while the S&P 500
Bond Mega 30 Investment Grade Index gained 9.04 % and the S&P China Corporate
Bond Index gained 6.35 %.
The S&P Municipal
Bond High Yield Index has shown a positive total return of over 1.68 % year to date and over 14 %
since this time last year.
High yield municipal
bond yields and relative spreads to investment grade munis have moved to lows not seen
since 2008.