Wed, Apr. 15, 4:23 AM
- Japan is set to overtake China as America's largest overseas creditor when the U.S. Treasury releases its February investment figures at 4 p.m. in Washington.
- China cut its investment in Treasuries for a fifth month in January, while Japan added $7.7B, narrowing the gap to $1B.
- While the two Asian nations each own almost 10% of the $12.6T in publicly traded U.S. debt, China has held more than Japan since 2008.
- U.S. 10-year treasury yield -3 bps to 1.9%
- ETFs: TBT, TLT, TIP, TMV, SHY, IEF, TBF, EDV, TMF, PST, TTT, ZROZ, VTIP, MBB, TLH, SBND, VGLT, IEI, SCHP, BIL, TYO, IPE, UBT, DLBS, DTYS, UST, TLO, LTPZ, PLW, STPZ, VGSH, GNMA, RINF, STPP, TIPZ, VMBS, SHV, VGIT, STIP, GOVT, FLAT, SCHO, TBX, SCHR, GSY, TENZ, TYD, LBND, DTYL, ITE, MBG, DTUS, DLBL, TYBS, AGZ, DTUL, SST, TUZ, TPS, DFVL, INFL, TDTT, FIVZ, TIPX, UINF, DEFL, TDTF, TAPR, TBZ, FINF, DFVS, TFLO, TYNS, USFR, SINF, SIPE, SYTL
Dec. 18, 2014, 12:11 PM
- Oil price drops similar or greater in magnitude than what's recently been seen have occurred a number of times over the past 30 years, say new Pimco CIO Daniel Ivascyn along with Saumil Parikh. Some have coincided with major recessions and others with faster global growth. So what gives for 2015?
- The short answer: This drop in oil is supply-, not demand-driven, they conclude, and thus should foster faster economic growth than otherwise next year.
- As for inflation, expect negative headline prints in developed economies next year, but these should bounce back later in 2015 and into the following year.
- Investment themes: 1) The outlook for easier monetary policy (in all but the U.S.) has been priced in, making for limited upside for high-quality duration 2) TIPS are attractive as their prices have more than discounted the coming negative inflation prints 3) Globally, eurozone peripheral bonds are the pick 4) In the U.S. non-agency mortgages (see Ivascyn's PDI) are poised for outperformance, but agency paper is overvalued, particularly as the Fed's purchases have ended.
- Ivascyn also manages the Pimco Income Fund (MUTF:PONAX) and (formerly managed by Bill Gross) the Pimco Unconstrained Bond Fund (MUTF:PUBAX).
- ETFs: AGG, BND, BOND, SCHZ, LAG, SAGG, DI, GBF, FBND, LDUR, FWDB, IUSB, VBND, TIP, VTIP, SCHP, IPE, LTPZ, STPZ, TIPZ, STIP, TPS, TDTT, TIPX, TDTF, SIPE
Jun. 25, 2014, 4:41 AM
- Expectations of U.S. and euro zone break-even rates seem to be heading in opposite directions, as investors wager on opposing consumer price outlooks. The break-even rates, as measured by the difference between yields on 10-year nominal Treasury notes and TIPs, are at about 2.3% in the U.S. This greatly differs in the euro zone, where Germany reports a rate of 1.3%.
- TIPs are expected to gain in popularity over the next year, as break-evens expect to rise in par with U.S. inflation. However, the euro zone is currently dealing with a falling inflation rate. Despite the European Central Bank instituting a 2% inflation mandate, annual inflation in the euro zone was only 0.5% in May.
- ETFs: TIP, WIP, VTIP, SCHP, IPE, LTPZ, STPZ, TIPZ, STIP, ILB, ITIP, GTIP, TPS, TDTT, TIPX, TDTF, SIPE, RINF, INFL, UINF, FINF, DEFL, SINF
Mar. 31, 2014, 7:53 AM
- After pouring money into U.S. Treasury ETFs in the first two months of the year, investors pulled $10.3B in March, the largest amount withdrawn since December 2010, according to Bloomberg. The $7.86B iShares 1-3 Year Treasury Bond ETF (SHY) is the leader on a percentage basis - losing one-third of its AUM this month.
- The catalyst is clearly the FOMC's signal on rate hikes beginning in about a year. “When the market thinks the Fed is going to raise rates, they don’t tend to stick around in short-dated bonds,” says global macro strategist Thomas Higgins.
- Short-duration Treasury ETFs: SHY, BIL, SHV, VGSH, SCHO, DTUL, SST, DTUS, TUZ
- In other areas of fixed income, inflation--linked bond ETFs had their first inflows in 19 months, and investors continue to plow money in high-yield.
- TIPs and junk ETFs: HYG, JNK, TIP, HYLD, HYS, SJNK, PHB, VTIP, IPE, SCHP, SJB, STPZ, LTPZ, TIPZ, HYHG, STIP, ANGL, HYLS, XOVR, THHY, UJB, TPS, SHYG, QLTC, TDTT, TIPX, HYZD, TDTF, HYND, SIPE
Mar. 20, 2014, 3:24 PM
- "Investing in fixed income today is almost the opposite of what it was one year ago," says BlackRock's Rick Rieder, believing those sectors which performed poorly last year will do well in 2014. As such, he sees the best value in long-dated munis and long-dated TIPs, and wants to avoid the belly of the curve - 3 to 7 years.
- He gives Janet Yellen good grades for her performance yesterday, saying she's merely acting appropriately to changing economic conditions. The "dots" are "a survey, not policy," says Rieder, but nevertheless, the markets quickly priced to them.
- ETFs: TIP, MUB, IEF, HYD, PST, BAB, PZA, MUNI, VTIP, IEI, IPE, TFI, SCHP, TYO, DTYS, LTPZ, STPZ, ITM, HYMB, TIPZ, UST, MLN, CMF, TBX, STIP, VGIT, SHM, BABZ, XMPT, BABS, SUB, PRB, GSY, NYF, PZT, SMB, SCHR, DTYL, ITE, CXA, SHYD, TYD, PWZ, TPS, FIVZ, PVI, DFVL, TDTT, TBZ, SMMU, INY, MUAF, TIPX, TDTF, DFVS, VRD, MUAG, MUAD, MUAE, TYNS, MUAC, GMMB, MUAH, RVNU, SIPE
Feb. 27, 2014, 11:26 AM
- The SPDR Barclays 0-5 Year TIPS ETF (SIPE) launches today and will offer investors short term exposure to the TIPS market; this space features a lot of competition.
- The iShares Enhanced International Large Cap ETF (IEIL) and Enhanced International Small Cap ETF (IEIS) began their active strategy this morning and offer expense ratios of 0.35% and 0.49% respectively.
- The PowerShares International BuyBack Achievers Portfolio (IPKW), like IEIL and IEIS, is based on a previously launched domestic strategy; the PowerShares BuyBack Achievers Portfolio (PKW).
- TIPS ETFs: TIP, VTIP, IPE, SCHP, STPZ, LTPZ, TIPZ, STIP, TPS, TDTT, TIPX, TDTF
- Broad international ETFs: VT, VSS, SCZ, DLS, ACWI, IOO, SCHC, ONEF, DGT, FIGY, RWV, FNDC, TOK
- Buyback ETFs: SYLD, FYLD
Dec. 18, 2013, 2:22 PM
- "The Committee sees the improvement in economic activity and labor market conditions ... as consistent with growing underlying strength in the broader economy," the FOMC says, adding that the decision to scale back QE by $10B per month is based on "the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions."
- Although the Committee says it will "likely reduce the pace of asset purchases in further measured steps [should] incoming information support [the] ongoing improvement in labor market conditions and inflation moving back toward [the] longer-run objective," the Fed notes that asset purchases are "not on a set course."
- FOMC also says it "anticipates .. that it likely will be appropriate to maintain the current target range for the federal funds rate well past the time that the unemployment rate declines below 6.5%."
- Updated FOMC projections: 2014 PCE inflation now seen at 1.4-1.6% (from 1.3-1.8% in September); 2014 GDP now seen at 2.8-3.2% (from 2.9-3.1% in September); 2014 unemployment rate now seen at 6.3-6.6% (from 6.4-6.8% in September). Full release
- 10-year yield is at 2.91% versus 2.87% just prior to the announcement.
- Dow (DIA +0.9%), S&P (SPY +0.6%), and Nasdaq (QQQ) all staged brief rallies on the news but have since retraced a bit. Gold (GLD +0.3%) fell sharply initially but recovered.
- ETFs: TBT, TLT, TIP, TMV, SHY, IEF, TBF, PST, EDV, TTT, TMF, VTIP, TLH, IPE, ZROZ, SBND, IEI, SCHP, DLBS, TYO, LTPZ, DTYS, STPZ, STPP, VGLT, TIPZ, UST, BIL, SHV, STIP, PLW, GOVT, FLAT, UBT, TBX, TLO, VGSH, VGIT, RINF, GSY, DTYL, LBND, SCHR, SCHO, TYD, ITE, TYBS, TPS, TRSY, TENZ, DTUL, TDTT, TUZ, SST, INFL, DTUS, FIVZ, TBZ, DFVL, FINF, UINF, DLBL, DEFL, DFVS, TIPX, TDTF, TYNS, SINF
Dec. 12, 2013, 6:53 PM
- The U.S. House overwhelmingly approves (332-94) a two-year budget framework spearheaded by Paul Ryan and Patty Murray that would remove the threat of a shutdown during the period. The eye-to-eye across the aisle comes as somewhat of a surprise and a rarity amid the rancor that has gripped budget battles in the past 2 years.
- John Boehner noted that the measure amounted to a small step toward the GOP's goal of deficit reduction: "Is it perfect? Does it go far enough? No, not at all," he said, while urging colleagues to support the plan. Democrat Chris Van Hollen: a "small positive step forward."
- The deal now goes to a Democratic Senate, which is expected to sign off as early as next week.
- Treasury ETFs: TBT, TLT, TIP, TMV, SHY, IEF, TBF, PST, EDV, TTT, TMF, VTIP, IPE, TLH, ZROZ, SBND, IEI, SCHP, DLBS, TYO, LTPZ, DTYS, STPZ, VGLT, TIPZ, UST, BIL, SHV, STIP, PLW, GOVT, UBT, TBX, TLO, VGSH, VGIT, RINF, DTYL, GSY, LBND, SCHR, TYD, SCHO, ITE, TYBS, TPS, TRSY, TENZ, INFL, SST, DTUL, TDTT, TUZ, FIVZ, DTUS, TBZ, FINF, DFVL, UINF, DEFL, DLBL, DFVS, TDTF, TIPX, TYNS, SINF
Nov. 29, 2013, 12:47 PM
- TIPS fared even worse than regular Treasurys in the bond market selloff this summer, and - down 8% YTD - are headed for their poorest performance since they were brought to market in 1997. The 10-year yield gap - the difference between 10-year yields on nominal and inflation-protected Treasurys, and a measure of inflation expectations - has shrunk to 2.14% from 2.5% at the start of the year.
- TIPS owners for years have accepted negative real yields on the expectation the Fed's monetary ease would lead to higher inflation. With inflation still quiet and the Fed set to wind down its QE, where's a TIPS bull to turn to? 2014 may be even worse, says JPMorgan, which sees CPI no higher than 1.7%. Combined with what the team expects will be a 120 basis point rise in real yields, it translates into a 8.4% loss for TIPS.
- Maybe bailing out TIPS next year would be a Yellen-led Fed indicating a greater tolerance for higher inflation and yet more delays in the taper.
- TIPS ETFs: TIP, VTIP, IPE, SCHP, LTPZ, STPZ, TIPZ, STIP, TPS, TDTT, TDTF, TIPX
Nov. 16, 2013, 10:08 PM
- "Our problem is that the S&P is up this year about 25% on earnings that are up 3%. So we've got a market that is rising because of P/E expansion," 21-year GMO veteran Ben Inker tells Barron's (one recalls a similar warning from Guggenheim back in August).
- Inker argues that because P/E multiples are still expanding at a time when profit margins are "already as good as we've ever seen," the prospects for upside surprises to profit growth look "pretty dim" going forward.
- As for bonds, Inker characterizes the return on U.S. government debt as "horrible" and says corporate debt "is riskier than people are making it out to be, particularly the very low-rated stuff."
- Inker's picks for the current environment: TIPS, "high-quality" U.S. companies, and emerging-market stocks where reasonable valuations leave room for some upside.
- "High-quality" U.S. stocks mentioned include: JNJ, MCD, WMT, MSFT
- TIPS ETFs: TIP, VTIP, IPE, SCHP, LTPZ, STPZ, TIPZ, STIP, TPS, TDTT, TDTF, TIPX
- EM ETFs: EEM, VWO, EDC, EDZ, SCHE, IEMG, EEV, PIE, ADRE, EUM, EET, GMM, EEME, EMCR, DBEM, EWEM, FEM, EMLB, EMSA, EMFT, EMDR
- High-yield ETFs: HYG, JNK, HYS, HYLD, SJNK, PHB, SJB, ANGL, XOVR, UJB, QLTC
Jul. 31, 2013, 3:31 PM
- TIPS (TIP +0.6%) turn from lower on the session to a sizable gain following the FOMC statement where the committee brought previous dissenter Jim Bullard on board by noting inflation below the 2% objective could pose a risk to the economy.
- The 10-year TIPS yield is down to 0.42% from 0.48% earlier, the 30-year down to 1.34% from 1.4%.
- TIPS, of course, become more valuable as inflation rises as their principal moves alongside.
Jun. 22, 2013, 9:30 AMIt's "total capitulation" in fixed income (AGG, BND), says BAML's Michael Hartnett. The "blood bath" includes the largest-ever three-week rush of bond-fund redemptions, $2.6B leaving (2nd largest outflow ever) the Emerging Markets Bond ETF (EMB), and mortgage-backed securities (MBB), municipal bonds (MUB), and TIPS (TIP) funds each now showing net outflows for 2013. | 47 Comments
Jun. 12, 2013, 4:26 PMAdd TIPS (TIP) to the list of safe-havens proving to be anything but as this sort of inflation-protection doesn't work when rates rise but inflation doesn't. The rout has sent the yield on 10-year TIPS into positive territory for the first time since Dec. 2011, reports Carolyn Cui. Investors have pulled $7.2B out of TIPS ETFs this year, already more than the $5.2B inflow for all 2012. | 3 Comments
Jun. 4, 2013, 4:42 PM
May. 30, 2013, 3:39 PMState Street launches the SPDR 1-10 Year TIPS ETF (TIPX), set to track the Barclays 1-10 Year Government Inflation-linked Bond Index. It appears similar in structure to another State Street TIPS fund (IPE), but with an expense ratio 3.5 bps lower at 0.15%. Also launched is the SPDR S&P Global Dividend ETF (WDIV), set to track the S&P Global Dividend Aristocrats Index. It has a cost of 0.40% and joins competitors DEW and LVL, each of those with coming with slightly higher costs. | 1 Comment
May. 15, 2013, 3:40 PMMore from Gundlach: Not concerned about inflation, he calls TIPS (TIP) "pretty bad" investments and says he'll be a buyer if the 10-year (TLT) yield bounces back to 2% (off 3 bps today to 1.94%). As for the inevitable Apple (AAPL -3.3%) question - he prefers the common stock to the just-issued bonds. Warren Buffett says he prays for stocks he owns to go down in price - it allows him and company repurchase programs to buy at better prices. Is Apple putting money to work the last couple of days? | 15 Comments
LTPZ vs. ETF Alternatives
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