It means that people have invested so heavily in
low yielding debt, that if rates return to «normal» higher levels, people will take large losses on «principal» to compensate for this fact.
Or there's a high coupon or a low priced debt tranche that can be forcibly redeemed / called at a nice price — again, replace it with new
low yield debt.
Not exact matches
Low sovereign bond
yields have long helped the government finance its
debt, thus, higher
yields would undermine the sustainability of its fiscal position, analysts said.
In the short - term, however, this increased leverage may actually be bullish for junk bonds, corporate bonds, emerging market
debt and mortgage - backed securities as it brings higher prices and
lower yields, he said.
That might
lower the amount of
debt entering the high
yield market.
U.S. government
debt yields were
lower on Tuesday after North Korea conducted its most powerful nuclear test and key Fed speeches.
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.
Yields in the $ 14 trillion market for U.S. government
debt touched record
lows in 2016, driven by years of aggressive central bank intervention in the wake of the 2008 - 2009 financial crisis to keep interest rates
low to stimulate the economy.
Government
debt yields fell to multimonth
lows, with the 10 - year
yield slumping below 2.1 percent as stocks declined on global economic worries.
Second, the average time to maturity on U.S.
debt is six years, meaning that most of the
low -
yielding bonds now on the books will be exchanged for more expensive
debt over the next decade.
Treasury prices rise, pushing
yields lower, on Monday after solid appetite for two batches of government
debt auctions see strong bidding, ahead of what's set to be a deluge of sales of government
debt in 2018.
debt obligations of the U.S. government that are issued at various intervals and with various maturities; revenue from these bonds is used to raise capital and / or refund outstanding
debt; since Treasury securities are backed by the full faith and credit of the U.S. government, they are generally considered to be free from credit risk and thus typically carry
lower yields than other securities; the interest paid by Treasuries is exempt from state and local tax, but is subject to federal taxes and may be subject to the federal Alternative Minimum Tax (AMT); U.S. Treasury securities include Treasury bills, Treasury notes, Treasury bonds, zero - coupon bonds, Treasury Inflation Protected Securities (TIPS), and Treasury Auctions
Roughly $ 10 trillion worth of global government
debt, in fact, now carry
low to subzero
yields.
Compared to the broad XIC, XEG has a) a price to earnings ratio that is only slightly higher, b) a price to book ratio that is
lower, c) a
debt to equity ratio that is about half of XIC, d) a dividend
yield that is comparable and e) profit margins that grew 30 % this year versus 18 % for XIC.
The potential counter weights that could cap the 10 - year
yield would be a negative stock market reaction that drives investors to bonds;
lower interest rates outside the U.S. that make the U.S.
debt relatively more attractive, and good demand for longer - dated securities from insurers and others.
Emerging - market companies have piled on
debt in recent years, allured by
low interest rates from
yield - starved investors.
In fact, investors seeking safety bought even more of the downgraded U.S.
debt, pushing prices on 10 - year U.S. Treasuries to within a fraction of face value and
yields to an all - time
low of 2.13 %.
The share of a large car manufacturer, for example, may trade on a
low P / E ratio, and have a great Dividend
Yield, but if it has a pile of
debt repayable next year then the
low share price might be valid.
This leads to a frightening conclusion: that both
lower quality and
lower yields of such «previously sacrosanct
debt represent a potential breaking point in our now 40 - year - old global monetary system.»
Although the bond market is also volatile,
lower - quality
debt securities, including leveraged loans, generally offer higher
yields compared with investment - grade securities, but also involve greater risk of default or price changes.
«The developing credit cancer may be metastasized, and the global monetary system fatally flawed by increasingly risky and unacceptably
low yields, produced by the
debt crisis and policy responses to it.
•
Lower - quality
debt securities generally offer higher
yields but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer.
Investing in higher -
yielding,
lower - rated, floating - rate loans and
debt securities involves greater risk of default, which could result in loss of principal — a risk that may be heightened in a slowing economy.
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
Oil prices have fallen more than 15 percent since March 4 to a six - year
low of $ 42.3, wiping out $ 7 billion of market value of high -
yield debt issued by energy companies.
According to Bloomberg data, EM
debt is offering
yields of above 4 %, and despite a strong year - to - date performance (more than 13 %), we see potential for significant income with
lowered spread risk, given the diminished expectations of a near - term Fed move.
You can invest in higher
yielding properties at much
lower valuations for $ 5,000 — $ 10,000 minimums versus coming up with a $ 200,000 + downpayment and taking on $ 1,000,000 in mortgage
debt for the median SF or NYC home price.
What this means in practice is that we have kept maturities of our investments very short, particularly for
low - risk issuers such as governments and agencies, while we seek out opportunities to increase portfolio
yield with what we think is well - priced corporate
debt.
I screened for Aristocrats which had a sustainable payout ratio, a reasonable dividend
yield, relatively
low debt / equity ratio, and positive projected earnings.
Structural factors such as aging populations, poor productivity growth and high
debt levels mean historically
low government bond
yields are likely here to stay.
In the case of the last crisis,
yields went over 20 % on junk
debt and even high - grade credits like Comcast and Nordstrom's were
yielding in the
low teens.
December was another solid month for European high -
yield debt, with Barclays's benchmark cash index tightening by 40 basis points, ending the year at a new post-crisis
low.
If you'll recall, the root cause of the collapse a decade ago was the market realization that all this
debt that was being sold to investors as high
yield and
low risk was suddenly reevaluated.
In recent months, the
yield on US corporate bonds, especially investment - grade securities, is a little more than 100 basis points compared to the
yield on government
debt, dropping within striking distance of the
lows seen post the 2008 financial crisis.
Valentum's investment policy favours companies with
low -
debt levels, high FCF
yields and high quality management teams.
The continuing
low level of government bond
yields has supported the search for
yield that has been evident over the past couple of years, with the spread between
yields on US government
debt and
yields on both corporate and emerging market
debt remaining around historical
lows over the past three months (Box B).
With interest rates on
low - risk investments falling to
low levels in many countries, investors have sought to maintain
yields by moving into higher - risk assets such as corporate
debt and emerging market
debt.
Money is now flowing out of high
yield debt which has been priced as if defaults will remain very
low.
This saw
yields on Japanese government
debt rise steadily in March and April to around 1.5 per cent, 30 basis points above their mid-February
low.
Personally I think mortgage
debt is the only good
debt, but I'm not sure I'd use it to buy
low -
yielding bonds.
Privately held
debt of the U.S. government as a share of GDP increased this cycle to 74 % from 39 % in 2008, prompting concern that the U.S. is doomed to a
debt trap in which high
debt and
low yields result in more
debt.
An inverted
yield curve is an interest rate environment in which long - term
debt instruments have a
lower yield than short - term
debt instruments of the same credit quality.
Yet by setting
yields so
low and bond prices so high, markets are sending a clear signal that they want more, not less, government
debt.
When investor preferences are risk - seeking, overly loose monetary policy can have a disastrous effect by promoting reckless speculation and enhancing the ability of
low - quality borrowers to issue
debt to
yield - starved investors.
With corporate
debt markets priced for another Great Depression, High
Yield Bonds are in a unique position to outperform equities given recent runups off the lows while providing a high yield income stream for years to
Yield Bonds are in a unique position to outperform equities given recent runups off the
lows while providing a high
yield income stream for years to
yield income stream for years to come.
As I've mentioned before, about $ 10 trillion worth of global government
debt now carries historically
low or negative
yields.
The Oakmark Equity and Income Fund invests in medium - and
lower - quality
debt securities that have higher
yield potential but present greater investment and credit risk than higher - quality securities, which may result in greater share price volatility.
-- Localities in the $ 3.7 trillion municipal market are planning the largest wave of
debt sales in almost three months, bucking a trend of diminished borrowing that's pushed
yields to the
lowest since June.
More than likely your pension fund and your bank all have substantial positions in
low (or negative)
yielding debt.
Yield spreads between emerging market sovereign
debt and US Treasuries have remained relatively
low over the past three months in most markets (Graph 12).