Between the market low in February and the July peak, high
yield bonds rallied roughly 15 %, according to Bloomberg data.
Much of last week's leveraged loan positive return accompanied a 3.2 % rally in equities (S&P 500) and a 0.8 % high -
yield bond rally as measured by the S&P U.S. Issued High Yield Corporate Bond Index.
Not exact matches
The dollar has
rallied through much of the past week as concerns over the U.S. - China trade dispute receded, and as the U.S. 10 - year
bond yield shot past 3 percent for the first time in four years.
Also, Ablin added a large portion of the recent
rally involved a rotation from
bonds into stocks as low interest rates forced investors to seek
yield in the stock market.
U.S. long - term rates would spike, while investors in Canada would rush to the domestic fixed - income market, setting off a
bond rally that would push Canadian
yields down «substantially,» said Burleton.
U.S.
bond yields rose as Wall Street shares
rallied.
Caused by worries of a summer interest rate hike and uptick in the U.S. dollar, gold and silver both stalled in May but have since
rallied on the back of Brexit and with government
bond yields in freefall.
Junk -
bond ETFs
rallied on Wednesday, as markets breathed relief that the «fiscal cliff» is no longer a concern and as a result,
bond yields are under 6 percent for the first time ever, and junk ETF share prices hit levels not seen in years in some cases, according to an article on ETF Trends.
Treasury
bond prices
rallied and
yields on the 10 - year fell to between 2.8 % and 2.85 % following the release of benign inflation data and weaker - than - expected retail sales figures.
U.S.
bonds have been
rallying for several months, but that came to an abrupt end last week as the
yield on the 10 - year U.S. Treasury
bond rose to 1.95 % while two - year
yields surged from 0.49 % to nearly 0.65 %.
As
bond yields surged on Friday, high -
yielding segments of the equity market such as utilities and REITs came under the most pressure, which shows that it won't take much of a rise in
yields to derail their
rally.
The government's 10 - year
bonds rose, pushing
yields to their lowest level this year, while the benchmark BUX stock index
rallied the most in six weeks.
Treasury
yields fall after tepid eurozone inflation data spark German bund
rally European government
bonds strengthened as inflation weakensTreasury
yields retreat on Thursday by falling rates in European government
bonds after eurozone inflation data came in weaker than expected.
Top 5 things that rocked U.S. markets this week — a surge in
bond yields sparked investor concerns, crude oil prices snap 2 - week winning streak, dollar extends
rally, gold prices struggle, and Bitcoin update
As Wolf Richter pointed out for Wolf Street earlier this month: «Since mid-December 2016, the Fed has hiked rates four times, in total by 1 percentage point, but over the same period, junk
bond yields rated CCC or below have declined 1.5 percentage points as the
bonds have
rallied.»
Then late in the week, stocks
rallied on some strong earnings reports and economic data, with a better - than - expected initial reading on first - quarter GDP pushing
bond -
yield lower on Friday and easing some earlier week concerns about inflation.
Rates subsequently bear steepened as long - end led the weakness, but renewed decline in risk sentiment managed to create a soft ceiling for
bond yields, and the rates market
rallied into the close.
The conditions have fueled a
rally in Portugal's sovereign
bonds so far this year, although they remain the second - highest
yielding bonds in the eurozone, behind those of Greece.
There are various ways to participate in the Junk
Bond rally that is just underway - from purchasing individual corporate
bonds to diversifying risk with double - digit
yielding Bond ETFs, Mutual Funds and individual corporate paper.
The narrative of higher rates being a headwind for gold seems to be falling apart, as the 10 year
yield in the US seems to be on an upswing, and gold is
rallying at the same time that
bond values fall.
(However, HYG and junk
bond funds are continuing to
rally as the hunt for
yield continues)
Oil - which
rallied sharply off of Netanyahu's comments yesterday regarding Iran - pulled back to $ 67.73, while the US 10 - year
bond yield remained steady between 2.951 % - 2.963 %.
Given that Treasury
yields broke through levels that have been a fairly reliable barrier for several years now, it wouldn't be surprising to see
bonds stage a «relief
rally» here, but both
yields and market action remain unfavorable overall, holding the Strategic Total Return Fund to a roughly 2 - year duration, primarily in Treasury inflation - protected securities.
Sentiment in financial markets has continued to improve over the past three months, with
bond yields in most major markets rising and equity markets
rallying further.
U.S. stocks are
rallying in tandem with
bond yields.
As risky assets like equities and high
yield bonds have come under pressure, gold has
rallied roughly 4 % (source: Bloomberg).
The recent rebound in commodity prices has been good news for high
yield bonds, helping the sector (and credit overall)
rally since mid-February.
[1] Sovereign
bonds have had a strong
rally since then; the total return rose 10.82 % YTD, while the
yield - to - maturity tightened 103 bps to 3.21 %, according to the S&P Philippines Sovereign
Bond Index as of Aug. 4, 2016.
But high valuations and a strong
rally in 2016 could see some profit taking in the high
yield sector, so we generally prefer investment grade
bonds.
The US Fed indicated further moves would be dependent on global factors and oil prices — a key detail signifying that future rate hikes seem likely to develop on a slower scale, causing a European government
bond market
rally on Thursday, sending
yields lower in the region.
The S&P Municipal
Bond High
Yield ex-Puerto Rico Index down nearly 4.5 % in the last three months of 2016 has
rallied back with a total return of 8.34 % in 2017.
Think of 1979 - 82: by the time
bond yields were nearing their peak levels,
bond managers were making money in nominal terms with rates rising because the income from the coupons was so high, and it set up the tremendous
rally in
bonds that would last for ~ 30 years or so.
This
bond breakout underway is issuing a stark warning: Get out of passive stock investments and real estate on any near - term
rallies... If
yields spike, as I expect we'll see, it'll send both asset classes into free fall.
Now the only «
rally talk» is centering on how high longer - term
bond yields might climb.
Rebalance: While stocks have
rallied sharply,
bond yields have improved somewhat (recall that
bond prices move in opposite direction to
bond yields)-- 10 - year
bonds are now
yielding 3.5 % up from around 3.0 % in March.
While muni
bond funds and ETFs have
rallied from their recent lows, with markets breathing a sigh of relief, it may be worthwhile at least picking up a steady performer that still carries an impressive
yield and has not failed to impress.
And here's the rub: high
yield bonds do not react to
yields on Treasuries, except negatively, because when Treasuries
rally hard, times are not good, and high
yield bonds do poorly, with
yields rising.
Bond markets generally react to the lowering of rates by
rallying, causing
yields to go down.
This weeks weakness is due to a
rally in crude oil prices, a pickup in government
bond yields as inflation rises and geo - political uneasiness around the globe.
Since
bond yields and prices are inversely related,
bonds rallied over the past five years.
Of course,
yields on 10 - year Treasuries (USGG10YR) have since fallen to 2.6 percent from 3 percent at the end of December and company
bonds have resumed their
rally.
No panic in investment grade
bonds, and the losses of the stock market have been minor over that time, leaving aside the fact that the market
rallied for a few more weeks after high
yield began to slide.
6) Junk
bonds have
rallied to a high degree; at this point I say, underweight them — the default losses are coming, and the
yields on the indexes don't reflect that.