Tired of the Yield Chase?
Guest post by Peter Tchir.
Chasing Yield Is Tiring Work – is the Market fit enough to keep going?
Well we got some chase for yield. High yield did well. EM did okay, as did Munis and Investment Grade. Closed end funds on the fixed income side did very well, benefitting from leverage and short memories, where once again investors want these at a premium (image of Homer Simpson repeatedly burning himself).
Treasuries actually had a good week in spite of the “risk on” mentality, but that was “confirmation” from Hilsenrath that the Fed is likely to continue to find ways to buy long dated treasuries once Operation Twist is officially over.
So it was a nice, and surprising combination for treasuries and risky bonds to do well, but this week was the first time in awhile that we saw some confusion in the broader market about corporate bond performance.
You look great in Blue, but this pink dress
Guest post by Peter Tchir.
There was some chatter about the performance of fixed income ETF’s yesterday. They performed poorly at least relative to stocks and some had a late day sell-off fueling some speculation that credit wasn’t doing well.
That speculation was just wrong, but highlighted so,e problems with existing fixed income ETF’s.
They were trading at a premium and that premium tends to disappear when bonds become easy to source. While HY bonds remained well bid, the investment grade bond market is being flooded with new issues – primarily to enable large one time dividends. Might be worth probing into these companies a little deeper, but that is for another day.
So premium versus bond availability explains some of the noise, but to a large degree that is secondary.
Latest comments