Trend Status Across Various Bond Categories

Most bond types of domestic US investment grade bonds are in up trends according to their 200-day simple moving averages. Munis are flat, but above their 200-day average. Investment grade corporates and inflation protected Treasuries are in mild 200-day down trends.

Bonds of all sorts (investment grade and junk, plus sovereign non-US developed and emerging market debt) are in short-term rally mode.

The rally may be in response to the US Treasury toxic asset purchase plan, and in hopes for the outcome of the G-20 meeting.

Higher interest rates lie ahead eventually as economic conditions improve, risk aversion decreases, and money supply expansion related inflation develops. That will be damaging to bonds. We aren’t there yet, however.

click images to enlarge

Vanguard Total Bond Market: BND

7-10 Year US Treasuries: IEF

10-20 Year US Treasuries: TLH

Inflation Protected US Treasuries: TIP

US Agency Backed Mortgage Bonds: MBB

National Municipal Bonds: MUB

Investment Grade Corporate Bonds: LQD

Below Investment Grade (junk) Bonds: HYG

Non-US Developed Country Sovereign Debt: BWX
(local currency)

Emerging Country Sovereign Debt: EMB
(US Dollar Denominated)

Comments

[oldman:]

with TIPS, will the inflation factor increase as yields also increase?
If I want to buy a TIP in the secondary market, do I look for a higher coupon or a lower inflation factor?

Apr 03 04:48 PM

[Richard Shaw:]

The principal amount increases and decreases with the CPI, but will not be less than the issued principal amount. Changes in the principal value are taxable annually, but not paid in cash until maturity ("non-cash" income which may be best kept in a tax deferred or tax-free account). The interest payments rise and fall with the CPI. The difference between TIPS yield and regular Treasuries yield is the implied future inflation.

Apr 03 06:55 PM

[oldman:]

Richard, this is the result of TIP auction today. How do you view it?

Coupon 2.125, price $103.3255, yield 1.589, bid to cover 2.25, 9 years 9 months to maurity

Apr 07 04:35 PM