Nov. 24, 2014, 11:18 AM
- Potential bond buyers are set to spend a net $2.4T next year, but borrowers will issue just $2T, according to JPMorgan. It will be the fifth time in seven years demand has outpaced supply, including about a $500B gap this year.
- What's going on here? Central banks. "There's really not been much supply hitting the market," says Nomura's George Goncalves. The ECB is set to buy about $400B in bonds next year, and the BOJ will add at least $700B, says JPMorgan. The BOJ owns about 20% of outstanding JGBs, and that proportion could rise to 50% as soon as 2018, according to the top economist at Japan Macro Advisors.
- ETFs: AGG, BND, BOND, SCHZ, LAG, SAGG, GBF, RIGS, DI, FBND, LDUR, FWDB, IUSB, VBND
Nov. 17, 2014, 12:46 PM
- Gluttons for punishment, bond bears are at it again, as - asked in a Bloomberg poll to choose just one asset class to short - 45% choose some sort of fixed-income product. That amount is three times the percentage who selected gold, and also higher than that of stocks, commodities, currencies, and real estate.
- “For rates to go a lot lower in the U.S. from the point they are trading at right now, things would have to go very bad in terms of growth,” says a money manager, neatly summing up the conventional wisdom.
- ETFs: AGG, BND, BOND, BIV, BLV, SCHZ, LAG, SAGG, ILTB, GBF, GVI, YPRO, FBND, BYLD, IUSB, AGND, AGZD, VBND
Oct. 30, 2014, 1:51 PM
- U.S-listed fixed-income ETFs are set to record their biggest monthly inflow on record, with BlackRock data showing inflows through Wednesday of $17.4B, which would top February's $17B.
- Those in the loop say a large chunk of that is money exiting Pimco's Total Return fund in the wake of Bill Gross' departure. They note a surge in trading volume in short-term government bond ETFs and board-market trackers which more or less act as cash substitutes. Those funds soaking up the bulk of the money this month: SHY, AGG, and BND.
- BlackRock's (NYSE:BLK) head of fixed-income strategy at its iShares unit Matt Tucker says his people have been talking to clients about using AGG as a bridge position while they figure out which manager they now want to stick with.
- ETFs: AGG, BOND, BND, SCHZ, LAG, SAGG, GBF, FBND, IUSB, VBND
Oct. 16, 2014, 4:23 PM
- The Vident Core U.S. Bond Strategy ETF (Pending:VBND) is the third fund by Vident Financial, LLC, launched just a year after its first fund, the Vident International Equity ETF (NASDAQ:VIDI).
- VBND will track a variety of domestic fixed income securities using an index which systematically over or underweights each sector based on macroeconomics and valuation.
- "Fixed income is a critical asset class in our client's portfolios and we set out to address some of the risk challenges they are facing in the core of their fixed income portfolio," said Nick Stonestreet, Chief Executive Officer of Vident Financial, in a press release.
- Other broad fixed income ETFs: AGG, BOND, BND, SCHZ, LAG, SAGG, GBF, FBND, IUSB
Oct. 15, 2014, 3:25 PM
- U.S.-based mutual funds saw $4.6B in outflows from taxable bond funds for the week ended October 8, according to ICI. This was less than the $21B withdrawn - the largest amount since records began being kept in 2007 - in the few days immediately after Gross exited Pimco and its mammoth Total Return Fund.
- Of course, while investors mull where to put that money now that Gross is no longer at the helm, fixed-income has undergone a major rally - the Total Return Fund itself is up more than 1% since the start of October.
- ETFs: AGG, BOND, BND, SCHZ, LAG, SAGG, GBF, FBND, IUSB
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. 19, 2014, 3:54 PM
- The Long Duration Total Return Bond Fund will have a dollar-weighted average effective duration of at least 10 years and will invest "in debt securities of any kind." Jeff Gundlach - who will be the fund's manager - has said he sees little amiss with interest rates at these low levels, and doesn't expect much of a rise from here.
- In addition to Treasurys, the fund's mandate allows for investments in MBS, CMOs, corporate debt (IG and HY), and overseas paper, among other instruments.
- Broad fixed income ETFs: AGG, BOND, BND, SCHZ, LAG, SAGG, GBF, IUSB
Jul. 29, 2014, 3:11 PM
- "The market is very complacent right now in terms of the valuations," says Matthew Eagan, co-manager of the Loomis Sayles Bond Fund. Along with co-managers Dan Fuss and Elaine Stokes, Eagan has doubled its short-term U.S. and Canadian debt holdings to 27% of AUM - a bet government bond rates are about to move higher.
- "The global economy is strong enough to support the Fed’s decision to continue the taper and eventually raise rates by the middle of 2015," says Eagan. "We want to be prepared for that to happen."
- Eagan's fund has outperformed 98% of its peers over the last five years.
- In today's action - as the FOMC is in day one of its 2-day meeting - the 10-year Treasury yield continues go its own way - off another three basis points to 2.46%. TLT +0.4%, TBT -0.8%
- ETFs: AGG, BOND, BND, SCHZ, LAG, SAGG, GBF, IUSB
Jun. 12, 2014, 9:25 AM
- The quest for yield reaches a new level with London fast food outlet Chilango finding fast demand for its Burrito Bonds, which offer those who invest £10K a free burrito weekly for the life of the debt.
- The company is trying to raise £1M for expansion and hit 32% of its target goal two days after the bond opened. Other than the free lunch, the four-year paper has an 8% coupon.
- ETFs: AGG, BOND, BND, SCHZ, LAG, SAGG, DI, GBF, LDUR, FWDB
Jun. 10, 2014, 3:47 PM
- It may not be the top for fixed-income, but "Bond Market Shortfall of $460B Seen Boosting Debt Markets" is the sort of headline you won't see at the bottom. The article from Bloomberg takes note of a JPMorgan analysis expecting debt issued this year to fall $600M from 2013 to $1.8T, while demand increases to $2.26T.
- Globally, bonds have returned 3.7% YTD, their best start to the year since 2003, according to the BAML Global Broad Market Index.
- "Everybody was expecting supply to come down, but maybe it’s coming down sooner” than anticipated, says SEI Investment's Sean Simko. “There’s a shift in sentiment from the beginning of the year when everyone expected rates to move higher.”
- ETFs: AGG, BOND, BND, SCHZ, LAG, SAGG, DI, GBF, RIGS, LDUR, FWDB
Jun. 2, 2014, 10:55 AM
- "I don’t expect the consensus to be right, I’m just surprised by how wrong it has been,” says Jim Bianco of bond market forecasts. The continuing rally in fixed-income has many questioning their models, including the FRBNY which last month altered its forecasting gauge to no longer include estimates from professional economists.
- In what sounds suspiciously like curve-fitting, the PhDs' new model now shows the continuing rally in Treasury prices as making perfect sense.
- Turning to the private sector, BofA's head of U.S. rates strategy Priya Misra sys a risk metric she's previously relied on - the gap between the rate on 10-year swaps and yields on Treasurys - hasn't worked since March. "Everyone is short and they are forced to cover," says Misra, throwing years of economics training out the window.
- ETFs: AGG, BOND, BND, SCHZ, LAG, SAGG, GBF
May 29, 2014, 12:32 PM
- "Being different is absolutely essential if you want a chance at being superior," says Howard Marks. Hoping to return to the top of the heap in fixed income performance, Bill Gross is at odds with many on the Street, loading the portfolio of the Total Return Fund (ETF: BOND) with Treasurys in the belly of the curve.
- The play is a bet on Gross' "new neutral," in which the neutral Fed Funds rate is at least a couple of hundred basis points less than commonly believed. If he's right, Treasurys with duration in the 3-7 year area should benefit the most as rate hikes are postponed or come in at a far slower pace.
- "Once they see the whites of the eyes of full employment, they will want to normalize rates at a faster clip," says Jonathan Beinner, co-head of global fixed income at Goldman Sachs Asset Management, summing up the conventional Street wisdom.
- ETFs: AGG, BOND, BND, BIV, SCHZ, LAG, SAGG, GBF, GVI, SHY, BIL, SHV, VGSH, SCHO, SST, TUZ, DTUL, DTUS
- Previously: Pimco: "New neutral" explains Treasury rally
May 22, 2014, 1:02 PM
- S&P Dow Jones Indices (MHFI +0.4%) expects to unveil smart beta bond indexes in Q4, while BlackRock (BLK +0.3%) doesn't yet have a timetable, but is experimenting with different ways of weighting components of the Barclays Aggregate Bond Index (AGG -0.1%) to make ETFs based on the new indexes, according to the company's Daniel Gamba.
- Those issuers with the most debt dominate traditional bond indexes, but smart beta supposedly reduces risk by giving more weight to factors like corporate cash flow, or economic growth rates in the case of sovereign paper.
- ETF issuers like iShares hope smart beta funds will lure investors seeking alternatives at a time of worry about higher rates. Smart beta is also more profitable for issuers - Vanguard's Total Bond Market ETF costs $8 in fees for every $10K invested as opposed to a number of smart beta funds charing $50 for every $10K.
- ETFs: AGG, BOND, BND, SCHZ, LAG, SAGG, DI, GBF, LDUR, FWDB
May 16, 2014, 9:13 AM
- Harkening back to the "new normal" thesis peddled by former colleague Mohamed El-Erian for the past few years, Bill Gross (BOND) talks of a "new neutral" to try and explain why 2.50 on the 10-year Treasury is a perfectly reasonable yield.
- With debt remaining high and economic expansion continuing to be lame, the "new neutral" real Fed Funds rate is about 0%-0.5%, says Gross, along with Richard Clarida. "If the new neutral policy rate is 0% and the Fed achieves its 2% inflation target, than the 10-year Treasury should trade at close to 2%."
- The investment implications: Bubble risk is lower than expected as markets have priced in a real Fed Funds rate of 1-2% and nominal of 3-4% by the end of the decade. If the "new neutral" of 0% real rates and 2% nominal plays out, asset markets could see plenty of support.
- ETFs: AGG, BOND, BND, SHY, BSV, BIV, BLV, SCHZ, BIL, PLW, SHV, GOVT, VGSH, LAG, SCHO, BYLD, ILTB, SAGG, ISTB, SST, GBF, TUZ, GVI, DTUS, DTUL, MINC, FWDB, AGND, AGZD
May 8, 2014, 3:04 PM
- Maybe more worried about having cash on hand to meet redemptions than beating their benchmark, bond fund managers have taken cash levels up to 7.6% of AUM at the end of March vs. 3% four years earlier.
- Times have changed in fixed-income land - banks have cut thousands from trade desks and shrunk their books of inventory, making it harder for debt managers to exit positions and raising the chance of far more price volatility should there come a rush to sell.
- Fund performance is being punished: The broad U.S. bond market up 3.2% this year - the best gains since 2010, according to BAML. Non-traditional bond funds - in which managers have flexibility to decide where to invest - are ahead just 1.7%.
- Broad bond ETFs: AGG, BOND, BND, BSV, BIV, BLV, SCHZ, LAG, BYLD, SAGG, ISTB, DI, ILTB, GBF, GVI, MINC, LDUR, FWDB, AGND, AGZD
Apr. 23, 2014, 12:51 PM
- The iShares Yield Optimized Bond ETF (BYLD) will give investors to a broad array of fixed income securities listed in the U.S.
- Unlike its wildly popular Core Total U.S. Bond Market ETF (AGG), according to the recently updated SEC filing BLYD will offer exposure to both investment grade and non-investment grade securities.
- Other total U.S. bond ETFs: BOND, BND, BSV, BIV, BLV, SCHZ, LAG, SAGG, ILTB, ISTB, GBF, GVI, MINC, FWDB, GIY
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