Falling oil prices, trade wars, tax overhaul and more are among the culprits for fixed-income’s less-than-stellar one-year results.
In the past year, the 20 top-performing bond funds with at least $5 billion in AUM posted an average annual return of less than 3%, according to Morningstar Direct data. For comparison, a similar screen of funds posted an average return of 9.95% in 2017, 13.17% in 2016 and 3.79% in 2015.
The most direct reason for the low figures the past year: multiple interest-rate hikes from the Fed last year — in March, June, September and December — helped flatten the yield curve, says Morningstar senior analyst Emory Zink. Continue reading →
Italian bonds rallied on Wednesday, pushing two-year yields down as much as 23 basis points as markets shrugged off the European Commission’s rejection of Rome’s draft budget and focused on the possibility of compromise between the two sides.
Deputy Prime Minister Matteo Salvini refuted a La Stampa newspaper report that he was open to reviewing the 2019 deficit of 2.4 percent of GDP, but said other aspects of the budget could be discussed.
Prime Minister Giuseppe Conte said he was worried about Italy’s bond spread over Germany and that the government would respond with reforms. Continue reading →
Record number of company credit ratings are on the cusp of ‘fallen angel’ downgrades
As benchmark interest rates in the U.S. rise and the pace of corporate earnings growth slows, Moody’s Investors Service warned Friday that an unprecedented number of corporate credit ratings could be added to the “junk” pile. Continue reading →
With rising interest rates and fairly tight credits spreads, are there still opportunities with fixed income oriented hedge fund strategies? Agecroft Partners recently spoke with five leading hedge fund industry experts who will be presenting on the “Opportunities in Fixed Income Oriented Hedge Fund Strategies” panel in early November at Gaining the Edge – 2018 Hedge Fund Leadership Conference in NY. Continue reading →
One of the ways to navigate a rising rate environment is to reduce your exposure to bonds with greater levels of interest rate risk. For many investors, this means moving toward short-maturity bonds. In exchange for lower risk, these issues typically generate lower income than longer-maturity bonds. The current market environment is unusual, however. A flatter yield curve means that short bonds are providing similar income to their longer-maturity counterparts-while still reducing interest rate risk. Investors wanting to gain exposure to short-maturity bonds often do so through bond exchange traded funds (ETFs) or mutual funds, which typically hold a diversified portfolio of bonds with maturities less than five years.
Douglas, Kloeckner Pentaplast bonds drop in fragile market
Secondary sales of debt help trigger large price falls
Bonds of two unrelated German companies that have slumped in recent months provide a cautionary tale of how the slightest whiff of bad news is able to unsettle investors in a nervous high-yield market.
Beauty chain Douglas GmbH’s bonds due 2023 have lost about 20 cents on the euro so far this year to 87 cents, while notes issued by packaging maker Kloeckner Pentaplast GmbH maturing the same year have lost almost 30 cents on the euro in 2018. The securities of both issuers are part of large and widely held capital structures and have declined after large block trades were reported.
Bonds Briefly is a new regular look at fixed income markets – addressing a range of issues from large macroeconomic factors, to smaller more technical influences on the market and how RLAM is investing on your behalf. Bonds Briefly is a quick way to learn something about things that are influencing bond investing right now.Continue reading →
Bond Investors Should Remain Focused on Short Term
With the Federal Reserve still in interest rate raising mode, bond investors should continue to avoid fixed-income investments with longer-term yields and keep their focus on the short term. That’s according to Collin Martin, director of fixed income for Charles Schwab’s Schwab Center for Financial Research, who said in an interview that the yields on longer-term bonds won’t rise at the same magnitudes seen in the first half of 2018. Continue reading →
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