Peter Tchir

Peter Tchir
Contributor since: 2011
Company: TF Market Advisors
the upside isn't the coupon, because the high coupons are on bonds that have a pull to par effect. total return is very constrained.
with a reasonable NAV i would. If you want leveraged income when the CEF's are at a premium, buy hyg/jnk/lqd/bkln and use margin
I don't necessarily recommend that, but buying HYG on margin isn't much different than buying a leveraged closed end fund, and the trade off of liquidity is worth something, let alone when the funds are at big premiums.
and 10k vs 9800 doesn't bother me. 10k vs 8k is bad idea though.
As an update, I think we see selling relent now that we are near NAV. I think we will in fact see some buying interest.
The CDS market may not have capitulated yet, but we gapped from 107 to 113 yesterday and finished the day at 111. Feels like mkt may have gotten carried away on the negatives.
Looks like a CLO will price today, which is good, and expect the HY calendar to slow down starting next week.
I don't know, but took a quick look at AWF. Argentina which has been crushed lately shows up as a reasonably large holding. So they may be in some markets that have had real problems, but that was just a quick look on my part.
Thanks I will check some of them out. I generally have liked Wamco and Babson funds. The Pimco ones always seem to trade at too much of a premium, though i was surprised to see PFL was roughly in line with other leveraged loan funds.
That's what I thought as well, that they are basically "look through" as the muni ETF's pay dividends that are tax free
I'm surprised no one has commented on this article since the fiasco, great job on the article.
they are interesting, but they are a bit small and concentrated compared to the big broad etf's
Good call. I think JEF may have been holding out for more, but with problems at Knight, Rochdale, and Cantor losing its investment grade rating, they may have been more willing to accept the embrace of a deep pocketed investor at a lower price than they would have otherwise.
I have been arguing for over a year maybe even over 2 years that the fixed income allocation was far far far far too low, and only now getting back to reasonable levels. So no bubble. Hy bonds have often outperformed, in no small part because many investors can't buy high yield. Leveraged loans are more interesting because they are under rated, but that is another story.
So no bubble but prepare for higher volatility as the euqitization of credit makes it more tradable.
Haven't checked recently but far less of a drag in mut fund nav's and market - good in long run
In core strategy we are moving BAB down by 10% and adding 10% to HY
In traded selling BAB down to 0% and adding 10% to HY, we had already added 5% earlier in week. Adding a 5% allocation to LQD
In aggressive we are selling out of BAB and buying 15% HY (already had 5%) . Adding a 10% allocation to LQD. Also adding a 2% allocation to NLY in the aggressive.
I completely agree on the YTW publication. Seems like something the SEC should be all over them. On the Ishares website, if you pull up the bond details, they actually have a yield to worst number, but it is wrong.
The duration seems based on maturity, which again, highly misleading for the high yield bonds.
It should be surprising that this is allowed, but i guess nothing the enforcement agents ignore is surprising at this stage.
None of the ETF's are fixed portfolios, so the "hold to maturity analysis" is a bit tough. The data for HYG and JNK is not totally accurate. Neither does a good job of providing good yield to call information on their websites. I am not sure why they don't since they have a column for it, but it doesn't match the drill down.
It has been awhile since I wrote this, but now, low VIX and volatility is becoming a concern to me.
no, if the bond prices in the underlying bond fund don't change, then the value of the etf would rise each month by the dividend amount, and go back to where it started after the payment, so you would have $8k of dividends and a fund still worth $100k, just like the bond
Thanks, sorry about that, but i've been trading bonds since 1994 and those are standard terms on desks.
It is one reason I get concerned about ETF's because they may "simplify" bonds too much.
bonds are quoted on "clean" price, but settle based on a "dirty" price. so every day, the value or "dirty" price of the bond adds the correct number of days of carry (3 on wednesdays, 1 every other)
so if a 5% bond pays its semiannual 2.5% coupon, the holder would get the coupon, but see the dirty price reduced as accrued, but unpaid interest resets to zero.
so fixed income etf's should behave like that. all else being equal you would expect HYG to be up about 1.7 cents per day, for a total of 51 cents on the month, which is its dividend
so just like a bond, if the price doesn't change you earned the interest for the month.
whether you reinvest or keep the interest it is your decision
I disagree for so many reasons:
1) with a market cap of 422 million, it is small to be that excited about, and on a quick glance, individual bond sizes are more concentrated and a few issuers are particularly concentrated - not every high yield company has bonds with 5 year maturities. former IG companies seem very large
2) why are 2 of the top 10 holdings term repos with DB and JPM?
3) many of the bonds are callable so any upside from here is further limited, much of the yield data or spread data is misleading as these aren't bullet bonds
4) at times of stress, you get inversion causing the front end to underperform
The ETF is an interesting idea, but has its own myriad of problems
the IMF will have oversight of the "conditionality" as I understand it. Which I think will be looser than with Greece and reasonably agreeable, so shouldn't be too onerous, but Spain has had a tendency to resist anything, so not sure if they ask while their bond yields are so low.
some is just debt replacement. borrowing from real people replaced with borrowing from ECB. Though with everyone running a deficit more debt accumulates
I was wrong when i shorted, but I had a bet on that Draghi would deliver and that it would help spain most, i kept the spain/italy long, and by time wrote this had put on spy short. IBEX hit high of 8900 earlier this year. It is only 7900. They would be direct beneficiaries.
I did underestimate how underweight mkt was and should have held onto long in SPY for longer. But Spain and Italy both up more than 4% and Spain almost 5%
Thanks, the 10 year is more exciting, but i think the ECB will have an easier time dealing with the short end. It's not a great solution, as good 10 year rates would be best, but overemphasizing those when assessing the "success" of any program could lead to underestimating the results.
I cut some short this morning...I think we fade into the European close, but then will likely get flat, and possibly a bit long again, $EWP is tempting down 4% from Tuesday's close. I missed part of the run up, but its now below where i sold.
IG18 also got about 101, but feels like it has support here (positive for risk).
sorry, yes, Credit Default Swaps. IG18 is the investment grade index, and HY18 is the high yield version.
lol! hi, great to hear from you! i update our site daily and send a mail mostly.
Interesting, but I remain concerned that people are underestimating the possibility that this is like 2003, where vol continues to decline as stocks continue to increase. Near term i've switched to negative US while mildly positive Europe, but am concerned that too many are underinvested and taking the wrong message from vix, volatility, and volumes.
ha, I will have to think about that one :) And I have turned bearish, but more based on level of mkt than vix or volumes, which i think are explainable and not a leading indicator.
We are getting closer to where I sell, but based on values, not where volatility or volume is.
My perception was that the past few days (and this was originally published yesterday morning) that the bears have been latching on to volume and VIX as reasons the market is due for a sell-off. In fact it seemed almost universally accepted that this level of VIX coupled with low volumes was sure to create a sell-off.
I do not believe that analysis is correct or accurate. VIX has been lower and VIX collapsed into 2004 and the bull market. I'm not saying that is going to happen here, but I am not sure why that case is so readily dismissed in favor of more recent trades other than we like recency.
I also think the premium of VIX versus realized VOL remains indicative that people are not that underprotected. Underprotected, yes, but too complacent? I'm not so sure.
Volumes have dropped but more and more our volumes are dependent on volatility because of sub-penny nano second trading. I do not think volume is that important anymore and have witness long stong market runs where every single day, the bears (of which I have been one) lament the low volume.
I'm not particularly excited about U.S. stocks here. I like European stocks better and banks as a whole, even here, but I also wouldn't get overly bearish based on VIX and Volumes.
yeah, and ELA was just enough to cover 2 months of Greek expenses and the ECB bonds due in August. Definitely tricky and games being played.
As a regular on Bloomberg, I am biased, but I agree with much of this article. CNBC has lost its focus on what matters. Fast Money. 60 in 60 seconds. Lightning round. Not just here to entertain you, but inform you...
Investing is not a game. It is not a replacement for Housewives of Beverly Hills.
Good article. I think people have gone so overboard that they don't understand how similar swaps are to futures, but at same time, I do think making them futures and trading them as such is better for the system. Swaps traded same way are effectively same, so why not call them futures?
Central pricing would be good across the board and it should reduce the "net" vs "gross" problems that is prevelant in many OTC derivative products.