|
|
|
|
| BondsOnline.com: instant access to and extensive coverage of over 3.5 million stocks, bonds, indexes and other securities covering major and emerging markets and exchanges across the globe. |
|
|
| Bonds Online |
|
|
| 5/10/2013Market Performance |
| Municipal Bonds |
|---|
|
S&P National Bond Index
|
3.00% |
|
|
S&P California Bond Index
|
2.96% |
|
|
S&P New York Bond Index
|
3.13% |
|
|
S&P National 0-5 Year Municipal Bond Index
|
0.70% |
|
|
| S&P/BGCantor US Treasury Bond |
400.09 |
|
| More |
|
| Income Equities: |
|---|
| Preferred Stocks |
|---|
|
S&P U.S. Preferred Stock Index
|
848.03 |
|
|
S&P U.S. Preferred Stock Index (CAD)
|
636.26 |
|
|
S&P U.S. Preferred Stock Index (TR)
|
1,701.05 |
|
|
S&P U.S. Preferred Stock Index (TR) (CAD)
|
1,276.26 |
|
|
| REITs |
|---|
|
S&P REIT Index
|
174.07 |
|
|
S&P REIT Index (TR)
|
425.30 |
|
|
| MLPs |
|---|
|
S&P MLP Index
|
2,469.58 |
|
|
S&P MLP Index (TR)
|
5,428.50 |
|
|
See Data
|
|
|
|
 |
|
|
|
|
|
|
Corporate Bonds: The New Safe Haven |
SmartStops.net - April 23, 2010 - by Kevin Grewal
Investors are fleeing to corporate bonds of non-financial companies. Here are some ways to gain diversified exposure.
As companies continue to outperform Wall Street’s expectations, bonds issued by non-financial companies are the most expensive they've been since the start of the credit debacle and investors are starting to shun away from Treasuries turning to corporate debt.
According to Bank of America Merrill Lynch Index data, Chevron Corp (CVX) and Johnson & Johnson (JNJ) led a drop in US industrial company debt yields to 130 basis points more than similar-maturity Treasuries. Additionally, the overall US corporate bond market is up 1.3% this month and is expected to post its fourth straight month of gains. In comparison, US Treasuries have returned a mere 0.4 percent for the month, after witnessing a decline of nearly 0.85 percent the month before.
Another indicator that corporate bonds are gaining appeal is overall corporate credit risk appears to be declining. The Markit CDX North America Investment Grade Index Series 14 continues to increase as it gained 1.2 basis points, reaching a level of 89.4 yesterday. The index is known to be used as a hedge against losses on corporate debt or a way to bet on corporate creditworthiness. Increases in the index generally indicate deterioration in investor confidence and decreases in the index indicate improving investor confidence. Overall, the consensus behind corporate debt is that it's likely to outperform credit-default swaps.
Tight spreads are another indicator that corporate bonds are healthy. In general, tight credit spreads in corporate bonds indicate increased confidence in the overall health of the issuing company. Chevron is benefiting from the recent rally as it's boasting the tightest spread among companies in the Bank of America Merrill Lynch industrial index. The energy conglomerate has a spread of one basis point on its $1.5 billion of 3.45 percent notes due 2012, which were at 104.5 cents on the dollar yesterday.
Health-care giant, Johnson & Johnson, is seeing a similar trend in its $600 million of 5.15 percent notes due 2010, which were at 18.76 cents yesterday, yielding a spread of four basis points.
One reason that this phenomenon is prevailing is due to the healthy first-quarter profits. Nearly 82 percent of the companies in the S&P 500 have reported quarterly earnings that have exceeded analyst expectations. This trend in non-financial companies is likely to continue as fundamentals in various sectors are expected to continue to improve, initial jobless claims are expected to continue their decline, and the overall US economy continues to stabilize. In fact, the International Monetary Fund (IMF) has recently revised its GDP growth expectation for the US in 2010 to 3.1%, up from its earlier expectation of 2.7% released in January; an indicator that the US economy continues to gain strength which will ultimately drive corporate profitability.
In conclusion, with President Obama proposing stricter regulations on Wall Street, worsening of the fiscal crisis in Europe, and the possible threat of a downgrade in US sovereign debt, corporate bonds of non-financial companies seem to be a safe haven that some investors are fleeing to.
Some ways to gain diversified exposure to corporate bonds include the following:
- iShares iBoxx $ High Yield Corporate Bd (HYG), which has a yield of 9.32% and is up 33% over the past year. HYG closed at $88.99 on Thursday.
- PowerShares High Yield Corporate Bond ETF (PHB), which has a yield of 8.62% and has gained 27.5% over the past year. PHB closed at $18.11 on Thursday.
Corporate bonds seem to be presenting an opportunity, but a hiccup in the economic recovery could potentially hinder their performance. To help protect against this risk, the use of an exit strategy which triggers price points at which an upward trend in the mentioned bond ETFs could come to an end is of importance.
According to the latest data at www.SmartStops.net, these price points are: HYG at $86.44 and PHB at $16.86. These price points change on a daily basis and are reflective of market volatility and both macro and micro economic factors. Updated data can be found at www.SmartStops.net.
|
|
|
|
|
|
| Partner Market Place |
|
|
|
| Stuff to look at |
Yield and Income Newsletter: A must have for income investors. subscribe NOW
S&P Commentary and Newsletters: S&P
|
|
| BondsOnline Advisor |
Income Security Recommendation January 2013 Issue.
Keep up with monthly, in-depth coverage of fixed income market strategies, commentary, and insights as seen by our sources. Sign up for the free BondsOnline Advisor now!
Unsubscribe here [+] |
|
|
|
|
|
|
|
|
