There are many other aspects of risk and reward related to the senior loan and high
yield corporate bond markets that can be discussed in additional posts.
That is one reason why I am skeptical of the run in the high
yield corporate bond market at present.
The fund seeks provide investment that correspond to the price and yield performance of an index tracks the U.S. high
yield corporate bond market.
BMO High Yield US Corporate Bond Hedged to CAD ETF (Ticker: ZHY; MER: 0.65 %) tracks the performance of the US high
yield corporate bond market and hedges its US dollar exposure.
However, a look at spreads in the high
yield corporate bond market yesterday shows that investors were warming back up to the sector (at least temporarily).
Not exact matches
So, it is a very different
market than it was 10 years ago, and you're going to see a lot of
corporate bond issuance as these infrastructure projects go out there, and you can capture some pretty good
yields and you know what you're buying because it's a
corporate bond.
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.
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.
History shows when the benchmark rate for everything in the economy from
corporate bond yields to mortgage rates moves by this much, this fast, the stock
market struggles in the following months.
These include emerging
market bonds, high
yield debt,
corporate bonds and mortgage
bonds.
Invest in high -
yield bonds and dividend -
yielding stocks, says the BofA - Merrill team, which is overweight high - grade and high -
yield corporate bonds, including financial sector names that are especially sensitive to the housing
market.
Our team of credit professionals deliver sales and trading capabilities across a wide range of fixed income asset classes including high
yield, distressed and investment grade
bonds, convertible
bonds, public and private
corporate securities, leveraged loans and emerging
market debt.
This leaves us roughly in the same position that we started the year, slightly overweight to spread product, i.e., investment - grade and high -
yield corporate bonds and emerging
markets (more recently, we also went back to a slight overweight on commercial mortgage - backed securities).
In the credit
markets, both investment - grade and high -
yield corporate bonds had negative returns for the first time in eight quarters, with down - in - quality subsectors in each unconventionally outperforming higher quality ones.
These steps include: efforts to simplify prospectus requirements for retail vanilla
bonds and ease the personal liability of company directors; improving
market transparency through the RBA's publication of new measures of
corporate bond yields; the lengthening of the government
bond curve; and the listing of certain fixed - income securities on the Australian Securities Exchange.
iShares S&P ® / TSX ® 60 Index Fund («XIU»), iShares S&P / TSX Capped Composite Index Fund («XIC»), iShares S&P / TSX Completion Index Fund («XMD»), iShares S&P / TSX SmallCap Index Fund («XCS»), iShares S&P / TSX Capped Energy Index Fund («XEG»), iShares S&P / TSX Capped Financials Index Fund («XFN»), iShares S&P / TSX Global Gold Index Fund («XGD»), iShares S&P / TSX Capped Information Technology Index Fund («XIT»), iShares S&P / TSX Capped REIT Index Fund («XRE»), iShares S&P / TSX Capped Materials Index Fund («XMA»), iShares Diversified Monthly Income Fund («XTR»), iShares S&P 500 Index Fund (CAD - Hedged)(«XSP»), iShares Jantzi Social Index Fund («XEN»), iShares Dow Jones Select Dividend Index Fund («XDV»), iShares Dow Jones Canada Select Growth Index Fund («XCG»), iShares Dow Jones Canada Select Value Index Fund («XCV»), iShares DEX Universe
Bond Index Fund («XBB»), iShares DEX Short Term
Bond Index Fund («XSB»), iShares DEX Real Return
Bond Index Fund («XRB»), iShares DEX Long Term
Bond Index Fund («XLB»), iShares DEX All Government
Bond Index Fund («XGB»), and iShares DEX All
Corporate Bond Index Fund («XCB»), iShares MSCI EAFE ® Index Fund (CAD - Hedged)(«XIN»), iShares Russell 2000 ® Index Fund (CAD - Hedged)(«XSU»), iShares Conservative Core Portfolio Builder Fund («XCR»), iShares Growth Core Portfolio Builder Fund («XGR»), iShares Global Completion Portfolio Builder Fund («XGC»), iShares Alternatives Completion Portfolio Builder Fund («XAL»), iShares MSCI Emerging
Markets Index Fund («XEM») and iShares MSCI World Index Fund («XWD»), iShares MSCI Brazil Index Fund («XBZ»), iShares China Index Fund («XCH»), iShares S&P CNX Nifty India Index Fund («XID»), iShares S&P Latin America 40 Index Fund («XLA»), iShares U.S. High
Yield Bond Index Fund (CAD - Hedged)(«XHY»), iShares U.S. IG
Corporate Bond Index Fund (CAD - Hedged)(«XIG»), iShares DEX HYBrid
Bond Index Fund («XHB»), iShares S&P / TSX North American Preferred Stock Index Fund (CAD - Hedged)(«XPF»), iShares S&P / TSX Equity Income Index Fund («XEI»), iShares S&P / TSX Capped Consumer Staples Index Fund («XST»), iShares Capped Utilities Index Fund («XUT»), iShares S&P / TSX Global Base Metals Index Fund («XBM»), iShares S&P Global Healthcare Index Fund (CAD - Hedged)(«XHC»), iShares NASDAQ 100 Index Fund (CAD - Hedged)(«XQQ») and iShares J.P. Morgan USD Emerging
Markets Bond Index Fund (CAD - Hedged)(«XEB»)(collectively, the «Funds») may or may not be suitable for all investors.
Other
bond funds focus on a narrower slice of the
bond market, such as a short - term Treasury fund or a
corporate high -
yield fund.
I still think there will be a flight to safety in sovereign
bonds when stocks have a bear
market but other areas such as high
yield and
corporate debt could run into some problems.
The average
market impact cost was 29 basis points (39 basis points) per $ 1 million traded for investment - grade (high -
yield)
corporate bonds.
The average investment - grade (high -
yield)
bond trades on less than 32 % (36 %) of days over the prior six months — liquidity in
corporate bonds was considerably lower than in traditional listed equity
markets.
The
yield on the 10 - year Treasury
bond climbed above 3 % for the first time since 2014, but of greater concern to many
market participants were remarks in major
corporate earnings reports suggesting that business conditions had likely hit their peak and were poised to deteriorate going forward.
And on the list of possible investments are also high
yield corporate bonds and, perhaps, some emerging
market sovereign
bonds.
Van Eck adds another
yield - generating ETF, this one focused on emerging
market corporate junk
bonds.
Any significant rise in
corporate bond yields would throw cold water on a key artificial impetus in the stock
market — corporations borrowing heavily to buy back their own stock.
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).
While the low level of credit spreads in Australia (and in other major
bond markets) largely reflects favourable trading conditions for
corporates, there is evidence that the search for
yield has been a contributing factor.
He also noted that it is a very poor time to buy
corporate bonds (high
yield bond index
yield 4.93 %) and Gundlach sees a negative return for the S&P in 2018 as the rates rout eventually gives the equity
market the yips.
The BAA spread refers to the
yield on
corporate bonds above the rate on comparable maturity Treasury debt, and is a
market - based estimate of the amount of fear in the
bond market.
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.
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.
We prefer shorter - term
corporate and municipal
bonds, whose
yields have temporarily spiked ahead of U.S. money
market reforms in October.
In 2015 Creditex expanded into serving the
bond market, through the launch of ICE Credit Trade, a leading electronic platform for trading investment grade and high
yield corporate bonds.
Eligible sectors include U.S. Treasurys, global government - related
bonds, global investment - grade and high
yield corporate bonds, and emerging
market bonds.
IMTB has a very broad mandate, covering investment grade and high
yield corporate, government, and emerging
market bonds with maturities between five and ten years.
The
bond market is broad and diverse, ranging from low - risk government
bonds to relatively high - risk high -
yield corporate bonds and emerging
market bonds.
So while low and negative interest rates across the globe has inspired flows into stocks, emerging
market bonds and
corporate credit in search of higher
yields, keep in mind the high correlations of these assets to oil prices and the advantages of holding actual diversifiers in your portfolio to smooth the ride.
It was observed that prices of other risk assets, such as emerging
market stocks, high -
yield corporate bonds, and commercial real estate, had also risen significantly in recent months.»
Spreads between
corporate bond yields and swap rates, which are a measure of the
market's credit risk perceptions, have fallen slightly since the previous Statement (Graph 43).
Roughly half of the ETFs have a higher correlation to treasury
bonds and the other half to the S&P 500 Index (i.e., CWB — convertible
bonds, JNK — high
yield corporate, PFF — preferred stock and XLU — utilities all react to interest rates but are more correlated to the stock
market than to treasury
bonds).
Using monthly levels of Moody's
yield on seasoned Aaa
corporate bonds and the Dow Jones Industrial Average (DJIA) during October 1928 through February 2018 (about 90 years) and monthly levels of the 10 - year government
bond interest rate and the stock
market from Robert Shiller during January 1871 through February 2018 (about 148 years), we find that: Keep Reading
Issuance of investment - grade
corporate bonds picked up in early March in a receptive
market, as investors sought higher
yields than were available on safe - haven Treasury
bonds.
The Deutsche X-trackers Emerging
Markets Bond Interest Rate Hedged ETF (EMIH), the Deutsche X-trackers Investment Grade
Bond Interest Rate Hedged ETF (IGIH) and the Deutsche X-trackers High
Yield Corporate Bond - Interest Rate Hedged ETF (HYIH) will begin trading on the Bats exchange on June 9.
The fund holds a minimum of 25 % allocation to mortgage - backed securities, a maximum of 20 % in high
yield corporate bonds, up to 15 % allocation to
bonds denominated in foreign currencies, and a 20 % cap to emerging
markets.
Today three Deutsche Bank ETFs — the Deutsche X-trackers Emerging
Markets Bond Interest Rate Hedged ETF (EMIH), the Deutsche X-trackers Investment Grade
Bond Interest Rate Hedged ETF (IGIH) and the Deutsche X-trackers High
Yield Corporate Bond - Interest Rate Hedged ETF (HYIH)-- delisted from the NYSE Arca exchange and listed on Bats» BZX Exchange.
Other
bond markets, like the high
yield corporate and senior loan
markets often have high concentrations of debt maturing in specific years in the near future — often referred to as a «maturity cliff».
The graph shows a range of
corporate bond maturities and the level of
yield available in the
market.
Fixed income sectors shown to the right are provided by Barclays and are represented by the following Bloomberg Barclays Indices — Treasury Inflation Protected Securities: U.S. Treasury Inflation - Protected Securities (TIPS) Index; Floating Rate Loans: US Floating - Rate Note Index (BBB); Asset - backed securities: US Asset - Backed Securities Index; High
Yield: US
Corporate High -
Yield Bond Index; Convertibles: US Convertible
Bond Index; Mortgage - backed securities: US Aggregate Securitized MBS Index; Broad
Market: US Aggregate
Bond Index; Municipals: Municipal
Bond 10 - Year Index; Investment Grade
Corporates: US
Corporates Index
US Treasuries initially sold off only to recover, investment grade
corporate bond markets had a somewhat muted reaction, while high
yield and Read more -LSB-...]
Other investors may want to consider the iShares Emerging
Markets Local Currency
Bond ETF (LEMB), iShares Emerging
Markets Corporate Bond ETF (CEMB), or iShares Emerging
Markets High
Yield Bond ETF (EMHY).
The Bloomberg Barclays US
Corporate High -
Yield Bond Index is an unmanaged broad - based
market - value - weighted index that tracks the total return performance of non-investment grade, fixed - rate, publicly placed, dollar denominated and nonconvertible debt registered with the Securities and Exchange Commission.