Sep. 4, 2013, 9:22 AM
- "How long can this last," asks Bloomberg's James Crombie, looking at the divergence since July of the lowest rated junk bonds (up) vs. AAA corporate debt (down).
- For the full year, bonds rated CCC or lower have gained 7.1% while AAA debt has lost 5%. It's only the third time since 1996 low-rated debt has gained while top-rated paper lost value.
- IG corporate ETFs: LQD, CBND, CORP, FLTR, FLRN, ITR, LWC, SCPB, VCIT, VCLT, VCSH, IGU, IGS, CSJ, QLTA, QLTB, BSCI, BSCJ, BSCK, BSCL, BSCM.
- High-yield ETFs: HYG, JNK, PHB, HYLD, HYS, SJB, UJB, SJNK, ANGL, BSJG, BSJH, BSJI, QLTC, XOVR.
Aug. 26, 2013, 3:18 PM
- Even as it recently upped its forecast for long-term Treasury yields, Barclays is constructive on corporate paper as "credit fundamentals in aggregate have remained largely intact." The team of Meli and Rogoff note interest coverage is at record-high levels.
- Recognizing the risk from Fed "policy normalization," the team still expects modest returns for the rest of the year from spread tightening.
- Barclays' 3.75% 10-year Treasury call last week.
- Corporate bond ETFs: LQD, CBND, CORP, FLTR, FLRN, ITR, LWC, SCPB, VCIT, VCLT, VCSH, IGU, IGS, CSJ, QLTA, QLTB, BSCI, BSCJ, BSCK, BSCL, BSCM.
Aug. 26, 2013, 10:05 AM
- With interest rates on the rise, corporate treasurers are shelving plans to raise money, with just $61B in corporate debt issued globally thus far in August - on course for the weakest month since 2008, according to Dealogic. In August 2012, $121B was raised.
- Corporate bond issuance was running at a fast pace earlier this year, but Apple's $17B April offering in hindsight looks very much like a bell-ringer.
- Bankers are hopeful going forward, with one noting a backup in the pipeline. "The market has generally re-priced on the back of higher yields and we fully expect investors to have appetite at new levels."
- U.S. corporate bond ETFs: LQD, CBND, CORP, FLTR, FLRN, ITR, LWC, SCPB, VCIT, VCLT, VCSH, IGU, IGS, CSJ, QLTA, QLTB, BSCI, BSCJ, BSCK, BSCL, BSCM.
- International corporate bond ETFs: PICB, IBND, IBCB, IBCC, IBCD, IBCE, IBDA, IBDB, IBDC, IBDD.
Aug. 12, 2013, 9:35 AM
- Mutual and ETFs (LQD) focused on investment grade corporate debt reported $639M of net inflows last week, the largest gain in over 2 months, according to BAML. In the 10 weeks previous, investors had pulled a net $8.3B out of these fixed-income funds. High yield funds (HYG, JNK) attracted $566M last week.
- The move comes has the IG yield spread to Treasurys has slipped 19 bps since hitting a 9-month high of 172 in late June.
- "There are signs of life," says one fund manager. "People are expecting tapering and are getting out of Treasurys" and into higher yielding assets.
- Other IG bond ETFs: CBND, CORP, FLTR, FLRN, ITR, LWC, SCPB, VCIT, VCLT, VCSH, IGU, IGS, CSJ, QLTA, QLTB, BSCI, BSCJ, BSCK, BSCL, BSCM.
- Other high-yield ETFs: PHB, HYLD, HYS, SJB, UJB, SJNK, ANGL, BSJG, BSJH, BSJI, QLTC, XOVR.
Jul. 9, 2013, 9:23 AMThere are more losses ahead for corporate paper (LQD), says JPMorgan's Jan Loeys, noting corporates replaced Treasurys as the favored way to get exposure to duration. "Potential buyers don't have the same capacity to absorb credit risk." Credit spreads didn't protect against higher rates during the recent bond bust - corporates lost 3.4% since May 22 vs. a 2.6% decline in Treasurys, according to Bloomberg's Lisa Abramowicz. | Comment!
Jul. 1, 2013, 12:14 PMThe exodus of money in June from emerging markets and (most) fixed income ETFs has been well documented, but did any funds garner new money? As a percentage of assets, 2 stand out - the iShares MSCI Germany ETF (EWG) and a leveraged-long Russell 2000 ETF (UWM). Also making the list of inflows are a number of short-term fixed income funds - SHY, SCPB, MINT - as investors shed duration risk. | Comment!
Jun. 26, 2013, 2:48 PMAttempting to answer the question of what the world would look like if the 10-year Treasury yield climbed to 4% while short rates remained about zero, Marty Fridson says spreads on high yield (HYG, JNK) and investment-grade (LQD) corporates would widen to levels seen at the time of the Lehman failure. He's quick to point out this is a stagflation scenario, but if the yields rose because of a booming economy, it would be a different result for corporate paper. | Comment!
Jun. 20, 2013, 1:27 PMTurning bearish on investment grade credit (LQD), BofA strategists recommend the purchase of CDS pegged to the paper. Redemptions from mutual funds and ETFs in response to lower prices is likely to accelerate the drop. "We think that in the short-term, investment grade credit spreads are biased wider." | Comment!
Jun. 11, 2013, 9:59 AMApple's iBonds are showing up in the holdings of numerous bond ETFs, including total U.S. bond market ETFs like AGG and corporate bond ETFs like LAG - both tied to indexes. The paper is also held by corporate bond ETFs LQD, SCHZ, ITR, LWC, and SCPB. Notably not owing any of the debt are the Pimco IG Corporate Bond Index (CORP) and Bill Gross' Total Return ETF (BOND). | Comment!
Jun. 3, 2013, 8:47 AMDid Apple's (AAPL) mammoth $17B bond sale mark the top for bonds? Ten-year Treasury yields bottomed for the year at about 1.62% right at the time of the offering and have gone vertical since (currently at 2.16%). A back-of-the-envelope calculation finds the company pocketing $724M in savings over the life of the paper by borrowing at the end of April vs. the end of May. TLT -7.6%, LQD -3.7% during May. | 3 Comments
May 30, 2013, 3:31 PMFidelity's plans for actively-managed ETFs takes shape, the firm registering the Fidelity Mortgage Securities ETF and the Fidelity Corporate Bond ETF. The mortgage product will invest in investment grade MBS and have a similar profile to the iShares MBS Bond Fund (MBB). The corporate fund will have similar interest rate risk to that of the iShares Credit Bond Fund (CFT). Getting with the times: They'll be the first new Fidelity ETFs in a decade. | Comment!
May 20, 2013, 1:10 PMWith borrowers racing to market before demand dries up or interest rates rise, corporate bond (LQD) sales this month are on pace for their busiest May ever, according to Bloomberg. The previous record of $162.6B was hit in 2008. Warnings from Buffett and Gross about the likelihood of higher rates are ignored as "investors have cash to spend yet fewer alternatives to buy," writes a Morgan Stanley team. | Comment!
May 10, 2013, 5:57 AMDon't panic, Moody's says, there's "no strong evidence that recent [corporate debt] issuance levels presage a damaging correction." The notion that a bubble is building in the corporate bond market isn't reflected in credit spreads which, for both investment grade (LQD) and high yield (HYG, JNK), are closer to long-run averages than they are to alarmingly tight. Furthermore, the ratings agency says a surge in issuance reflects the "disintermediation of the banking sector" and notes that the proportion of total corporate liabilities comprised of debt securities hasn't significantly increased over the past two years." We can all rest easy now. (previous) | 2 Comments
May 8, 2013, 11:20 AMCoupons continue to shrink on fixed-rate U.S. corporate bonds reports Fitch, with the average falling to 5.6% in March, down from 5.7% at year end, and 6.1% a year ago. Investment-grade paper (LQD) came in at 3%, speculative (HYG, JNK) at 6.3%. New issuance in Q1 was $259.5B, putting 2013 on pace with 2012's record activity. Rating activity remains subdued, with downgrades affecting just 1% of issuance, upgrades 1.8%. | Comment!
Apr. 12, 2013, 12:28 PMFixed-income may not be being given away as it was in 2010, but there's still value, says Jeff Gundlach, scoffing at talk of a bond bubble. "Raise your hand" if you own Treasurys for yourself or a client, he asked a room full of advisors (none went up). Bonds are not "over-owned" in the U.S., he says, showing cash and fixed income make up a higher percentage of household financial assets in other countries. | 5 Comments
Feb. 27, 2013, 11:10 AMLeading off his latest outlook with Alan Greenspan's "irrational exuberance" line, Bill Gross (BOND) ponders its application to credit markets (LQD, HYG, JNK) today. Conclusion: Not yet. Labeling credit irrationality a 6 on a scale of 1-10, Gross suggests not selling, but instead lowering expectations.
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