Seeking Alpha
Profile| Send Message| ()  

Fixed income indices provide important insight into debt market conditions that are key to asset allocation strategies. MyPlanIQ tracks detailed weekly bond trend movement. We use ETFs that represent the bond classes.

Last week we noted that practically all bond assets other than high yield and treasuries had dropped dramatically. This week, we have seen some modest gains in short/medium maturity bonds and Munis. This indicates that terrifying state finances have produced an overdone sell off in municipal bonds.

Assets Class

Symbols

11/26
Trend
Score

11/19
Trend
Score

Direction

High Yield

JNK

4.05%

6.13%

v

Emerging Mkt Bonds

PCY

3.45%

3.64%

v

Long Term Credit

LQD

2.5%

2.55%

v

Intermediate Treasury

IEF

2.34%

2.15%

^

Intermediate Term Credit

CIU

2.16%

2.1%

^

Inflation Protected

TIP

2.05%

1.96%

^

MBS Bond

MBB

1.55%

1.57%

v

10-20Year Treasury

TLH

1.46%

1.18%

^

International Inflation Protected

WIP

1.17%

3.93%

v

US Total Bond

BND

1.05%

1.04%

^

Short Term Credit

CSJ

1.0%

1.09%

v

Short Term Treasury

SHY

0.46%

0.44%

^

Treasury Bills

SHV

0.02%

0.03%

v

International Treasury

BWX

-0.15%

2.01%

v

20+ Year Treasury

TLT

-0.54%

-1.29%

^

New York Muni

NYF

-0.73%

-2.31%

^

National Muni

MUB

-1.1%

-1.68%

^

California Muni

CMF

-1.24%

-2.86%

^

Top Three Indicators

Click to enlarge

The spreads on speculative-grade bonds widened as investors still lacked confidence on whether Ireland’s fiscal crisis will be contained. At the same time in the U.S., data on jobless claims and manufacturing bolstered optimism the world’s biggest economy won’t slide back into recession, causing borrowers to default on the debt.

Factories in the Philadelphia region also expanded at the fastest pace of the year, and the number of workers seeking jobless benefits over the past four weeks fell to the lowest level in two years. The economic data appears to be in a strengthening mode and it is difficult to see a major sell-off of high yields gaining momentum.

Bottom Three Indicators

Click to enlarge

The Munis markets reversed their recent downward trend and have stabilized. One of the biggest worries for muni bond investors has been state and local budgets that have gotten out of hand all over the U.S. Although large-scale muni defaults are rare and they are usually resolved by investors getting late payments, there’s no ignoring the fact that states such as California and New York are in financial trouble and need to quickly find a way to balance their budget and get through the current period.

Disclosure: No positions.

Source: Fixed Income Trends: Credit Markets Largely Stabilized