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Dec. 2, 2014, 5:09 AM
- With a $17B issuance from Medtronic (NYSE:MDT), U.S. corporate bond sales broke an annual record yesterday, pushing offerings for 2014 past the $1.5T mark.
- The surge in sales has been boosted by record-low borrowing costs, prompting companies to lock in on the low rates.
- ETFs: HYG, JNK, LQD, HYLD, HYS, VCSH, SJNK, VCIT, VCLT, CORP, CSJ, SJB, BSJF, CIU, HYHG, BSJE, BSJG, CRED, ANGL, LWC, BSJI, HYLS, SCPB, CLY, WYDE, BSCF, BSCE, ITR, BSCH, UJB, HYZD, XOVR, IGHG, QLTA, THHY, BSCG, BSJH, BSCI, QLTC, SHYG, BSJJ, HYGH, HYND, TYTE, BSJK, IBCE, COBO, IGS, SLQD, BSCK, CBND, FCOR, LQDH, IBCB, LDRI, QLTB, BSCJ, IBCC, BSCM, IBDH, IBDF, BSCL, IBDD, IGU, IBDC, BSCN, IBDA, IBDB, IBCD, BSCO, SKOR, BSJL, BSJM
Oct. 9, 2014, 1:31 PM
- The Fidelity Total Bond ETF (Pending:FBND), the Fidelity Limited Term Bond ETF (Pending:FLTB) and the Fidelity Corporate Bond ETF (Pending:FCOR), the first actively managed bond exchange-traded funds from Fidelity Investments, began trading this morning.
- Fidelity's timing could not have been better, with many investors, shaken by Bill Gross's departure from PIMCO, may be searching the market for new investment options.
- “I would say the timing of our launch is fortunate; however, this is part of a really well-thought-out long-term strategy around ETFs,” said Scott E. Couto, president of Fidelity Financial Advisor Solutions.
- Other total market ETFs: AGG, BOND, BND, SCHZ, LAG, SAGG, GBF, IUSB
- Other short term ETFs: BSV, ISTB, MINC
- Other corporate bond ETFs: LQD, CORP, CRED, QLTA, IGS, COBO, CBND, QLTB, IGU
Sep. 23, 2014, 2:37 PM
- Among the changes BlackRock (BLK -0.9%) is urging in a new paper is replacing banks as the primary middlemen in the market and moving transactions to electronic markets. Another: Encouraging companies to issue debt with more standardized terms, thus cutting the complexity of the market.
- Despite years of effort by BlackRock and others to wrest control of corporate debt trading from banks, the top ten dealers still control more than 90% of trading, according to Greenwich Associates. For now, ZIRP is masking many issues, but the price gaps and scant liquidity remain.
- “These reforms would hasten the evolution from today’s outdated market structure to a modernized, ‘fit for purpose’ corporate bond market."
- ETFs: LQD, CORP, CRED, QLTA, COBO, IGS, QLTB, CBND, IGU
Sep. 19, 2014, 3:03 PM
- "This capital largely did not even exist" in the days ahead of the financial crisis," says Deutsche's head of credit strategy Oleg Melentyev. Private-equity funds have raised at least $300B to invest in credit, and are likely buyers in any selloff, he says, taking over a job that used to be performed by the banks.
- Shops like Carlyle Group, Blackstone, and KKR are among those who have diversified beyond their traditional buyout operations in part by boosting their debt investments. Recently public Ares Management (NYSE:ARES) has the most amount of capital to invest in its 17-year history, says the head of its tradable credit group.
- "Our estimate of alternative capital in credit exceeds the total drop in dealer inventories [i.e. banks] since 2007," says the Deutsche team.
- ETFs: HYG, JNK, LQD, HYLD, CORP, SJB, CRED, ANGL, HYLS, UJB, XOVR, QLTA, QLTC, IGS, COBO, QLTB, CBND, IGU
Sep. 3, 2014, 1:07 PM
- Investment-grade bonds (NYSEARCA:LQD) should provide annual returns of just 1-2% for the next seven years, says Morgan Stanley Wealth Management's Jon Mackay, meaning an investor will lose money after accounting for inflation. This compares to the 8.7% average annual return posted for the last three decades.
- What to do? Rotate out of the perceived "safe havens," says Mackay, and move into higher-yielding assets. It's hardly contrarian advice as investors have been plowing money into junk debt, equities, and alternatives like real estate and private-equity for years. High-yield bonds globally are on pace for another big year after returning 142.7% in the previous five years.
- ETFs: LQD, CORP, CRED, QLTA, COBO, IGS, CBND, IGU, QLTB
Jul. 25, 2014, 3:42 PM
- "We think the likelihood of a rise in government bond yields has increased and see this as a key aspect of the near-term macro outlook," says analyst Anders Nielsen as Goldman Sach's Global Opportunity Asset Locator (GOAL) downgrades equities to Neutral over the next 90-day period.
- This is a short-term call, says Nielsen, reminding his team's continuing to be Overweight equities over the next 12 months.
- The outlook for corporate credit is a bit more dour, with that asset class being downgraded to Underweight over both the next 3 and 12 months. Most at risk, says Nielsen, are investment grade credits given that spreads there are the tightest.
- Broad equity ETFs: VV, SCHX, FEX, JKD, EQL, IWL, EEH, ERW, FWDD, SYE
- IG Bond ETFs: LQD, CORP, CRED, QLTA, COBO, IGS, CBND, IGU, QLTB
Jul. 25, 2014, 11:14 AM
- Withdrawals from high-yield funds accelerate, hitting about $4.8B this week, according to EPFR Global - that's the 3rd largest weekly outflow since June of 2013.
- Investment-grade funds, on the other hand, saw inflows of roughly $4.2B, their 31st consecutive week of inflows.
- Jim Reid's Deutshce notes high-yield has been struggling this month, but no signs of stress have emerged. Indeed, the high-yield issuance market remains open for business, with another $1.3B priced just yesterday.
- High-yield ETFs: HYG, JNK, HYLD, SJB, IHY, ANGL, HYLS, PGHY, HYXU, UJB, XOVR, QLTC, IJNK
- IG ETFs: LQD, CORP, CRED, PICB, IBND, QLTA, COBO, IGS, CBND, IGU, SUBD, QLTB
Jun. 16, 2014, 3:51 PM
- Concerned about a run on the $10T corporate bond market, the Fed is considering imposing exit fees on bond funds, reports the FT.
- "So much activity in open-end corporate bond and loan funds is a little bit bank like,” Fed Governor Jeremy Stein told the FT just before he stepped down last month. “It may be the essence of shadow banking is ... giving people a liquid claim on illiquid assets.”
- Needless to say, the fees would be unpopular for investors, but fund managers may feel differently, and BlackRock, for one, has called for international rules on exit fees for some funds. Implementing exit fees would be easier said than done as a rule change by the SEC would be necessary, and some commissioners are reportedly set to put up a fight.
- ETFs: LQD, CORP, CFT, QLTA, COBO, IGS, CBND, IGU, QLTB
Jun. 10, 2014, 12:43 PM
- Introduced in October 2012, the iShares core lineup will double in size on June 12th with the addition of 10 new and existing iShares funds.
- Four new ETFs will roll out on Thursday to join the core lineup: iShares Core Dividend Growth ETF (DGRO), iShares Core MSCI Europe ETF (IEUR), iShares Core MSCI Pacific ETF (IPAC) and iShares Core GNMA Bond ETF (IUSB).
- Six of the funds are existing and will undergo name and some will also see ticker changes: iShares Russell 3000 Growth ETF (IWZ) will become iShares Core U.S. Growth ETF under the ticker IUSG; iShares Russell 3000 Value ETF (IWW) will become iShares Core U.S. Value ETF under the ticker IUSV; iShares High Dividend ETF (HDV) will become iShares Core High Dividend ETF and continue to trade under HDV; iShares Credit Bond ETF (CFT) will become iShares Core U.S. Credit Bond ETF under the ticker CRED; iShares U.S. Treasury Bond ETF (GOVT) will become iShares Core U.S. Treasury Bond ETF and continue to trade under GOVT; iShares Barclays GNMA Bond ETF (GNMA) will become iShares Core GNMA Bond ETF and continue to trade under GNMA.
- The original core iShares ETFs these funds will join: ITOT, IVV, IJH, IJR, IXUS, IEMG, IEFA, AGG, ILTB, ISTB
May. 28, 2014, 11:53 AM
- The iShares Interest Rate Hedged Corporate Bond ETF (LQDH) is an active ETF which will invest primarily in the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) while mitigating the fund's interest rate risk exposure.
- The iShares Interest Rate Hedged High Yield Bond ETF (HYGH) is an active ETF which will invest primarily in the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) while mitigating the fund's interest rate risk exposure.
- Two target maturity date ETFs will also launch on the 29th: the iSharesBond Dec 2016 Corporate Term ETF (IBDF) and the iSharesBond Dec 2018 Corporate Term ETF (IBDH).
- Other high yield corporate bond ETFs: JNK, HYLD, SJB, HYHG, ANGL, HYLS, UJB, XOVR, THHY, QLTC
- Other corporate bond ETFs: CORP, CFT, QLTA, IGHG, COBO, IGS, CBND, IGU, QLTB
- Other target date corporate bond ETFs: BSCE, BSCF, BSCH, BSCG, BSCI, IBCE, IBCB, BSCK, IBCC, IBDC, BSCJ, BSCM, IBCD, IBDA, IBDB, BSCL, IBDD
May. 23, 2014, 6:35 PM
- Regional transmission organization PJM says its recent auction to procure power supplies for 2017-18 resulted in a clearing price for resources - which includes generation, annual demand response and energy efficiency - which rose to $120/MW-day for most of its deliverability area.
- PJM, which coordinates the movement of wholesale electricity in all or parts of 13 states and D.C., says the auction continued an overall trend toward more gas-fired generation and increasing diversity of resources.
- PPL, Exelon (EXC), American Electric Power (AEP), Duke Energy (DUK), Dominion Resources (D) and FirstEnergy (FE) are all up ~1% AH.
- Earlier, Barclays downgraded the entire electric sector of the U.S. high-grade corporate bond market to underweight, saying it sees long-term challenges to electric utilities from solar energy which aren't yet priced in.
- ETFs: XLU, LQD, IDU, VPU, CORP, CFT, UPW, FUTY, RYU, FXU, QLTA, SDP, IGHG, COBO, IGS, CBND, IGU, QLTB
May. 20, 2014, 11:44 AM
- With borrowing costs about the lowest on record, and investors lending first and asking questions later, corporate finance officers are busy taking out loans. "My treasurer tells me always borrow when you can, not when you have to," says Shell CFO Simon Henry. "There are huge liquid pools at whatever tenor we need ... There's more capital out there than we can consume."
- The average yield on corporate debt has fallen 61 basis points this year to 4.4%, nearing last year's pre-bond bear market low of 4.1%.
- “The market is pretty hot,” says George Dessing, treasurer of Dutch business-to-business publisher Wolters Kluwer NV which raised 10-year money this month. “We have a preference for longer maturity and especially right now at these low costs it was a no-brainer.”
- ETFs: LQD, VCSH, VCIT, VCLT, CORP, CSJ, CIU, CFT, SCPB, LWC, ITR, CLY, IBND, PICB, QLTA, IGHG, PFIG, SLQD, IGS, CBND, SUBD, IGU, QLTB
Apr. 22, 2014, 11:55 AM
- Maybe surprising to many, long-dated investment-grade corporate bonds are outperforming junk bonds this year, with total returns already of 7.48% vs. junk at 3.3%. It's a turnaround from 2013, when high-yield returned 7.42% vs. a loss of 1.57% for IG paper.
- It's good news for institutional investors like pension funds and insurers, who have been big buyers of the bonds in recent months.
- Investment-grade corporate debt ETFs: LQD, VCSH, VCIT, VCLT, CORP, CSJ, CIU, CFT, SCPB, LWC, CLY, ITR, QLTA, IGHG, PFIG, SLQD, IGS, CBND, IGU, QLTB
- In other junk bond news, DoubleLine's Bonnie Baha says the firm's core fund has cut its high-yield exposure to 3% from 6%. High prices are the reason, says Baha, noting the average price of 104.5 cents on the dollar. Many issuers can force redemptions at 103 cents, and if they don't get called, in a low-rate environment there's extension risk.
- Baha takes note of the proliferation of short-duration high-yield funds. "It's a fallacy to think that just because it’s short-term that bad things can’t happen."
- High-yield ETFs: HYG, JNK, HYLD, HYS, SJNK, PHB, BSJF, SJB, BSJE, BSJG, HYHG, BSJI, ANGL, HYLS, UJB, BSJH, XOVR, THHY, YPRO, SHYG, QLTC, BSJK, HYZD, HYND, BSJJ
Apr. 10, 2014, 10:39 AM
- "The good ole' days are gone," says UBS, cutting its recommendation for U.S. corporate bonds to "small underweight" ahead of what's expected to be the beginning of a rate hike cycle in about a year.
- With spreads already so tight, any further gains from spread tightening will be marginal at best and not enough to make up for rate increases, says the team, which is bearish on both investment-grade and high-yield corporate debt.
- ETFs: HYG, JNK, LQD, HYLD, HYS, VCSH, SJNK, VCIT, VCLT, CORP, PHB, CSJ, CIU, SJB, CFT, HYHG, SCPB, LWC, ANGL, CLY, ITR, QLTA, HYLS, UJB, XOVR, THHY, IGHG, SHYG, QLTC, PFIG, SLQD, HYZD, IGS, HYND, CBND, QLTB, IGU
Apr. 1, 2014, 3:27 PM
- Investment-grade corporate paper returned 2.7% in in Q1 vs. a 1.42% gain for the MSCI World Index of stocks, the first time debt beat equities since Q2 of 2012. This follows stock gains of 27% last year while bonds fell 1.45%, and a near-universal outlook at the start of the year to rotate out of fixed-income and into equity.
- Junk bonds returned 2.86% in Q1.
- Helping, of course, is the decline in benchmark Treasury yields, but corporate balance sheets have improved, with at least some of that related to the rollicking stock market narrowing pension fund deficits.
- ETFs: LQD, VCSH, VCIT, VCLT, CORP, CSJ, CIU, CFT, SCPB, LWC, BSCE, BSCF, CLY, ITR, QLTA, BSCH, BSCG, IGHG, BSCI, PFIG, SLQD, IBCE, IBCB, BSCK, IGS, IBCC, BSCJ, BSCM, CBND, IBDC, IBDA, QLTB, IBCD, IBDB, BSCL, IBDD, IGU
Mar. 7, 2014, 2:14 AM
- General Electric (GE) has taken advantage of continued low rates with a $3B bond sale comprising $2.25B of 30-year notes and $750M in 10-year paper.
- The auction attracted strong demand, mainly due to the not-so-common opportunity to buy debt from the parent company rather than GE Capital. The last time the parent sold bonds was in October 2012.
- GE is rate at AA+ at S&P.
- Meanwhile, following shareholder feedback, GE will end dividend payments to senior management on new stock that has yet to vest.
- ETFs: LQD, VCSH, VCIT, CORP, VCLT, CSJ, CIU, CFT, SCPB, LWC, CLY, ITR, QLTA, IGHG, PFIG, SLQD, ENGN, IGS, CBND, QLTB, IGU
CRED vs. ETF Alternatives
The iShares Core U.S. Credit Bond ETF seeks to track the investment results of an index composed of U.S. dollar-denominated, investment-grade corporate, sovereign, supranational, local authority and non-U.S. agency bonds.
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