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| 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. |
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| Bonds Online |
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| 5/10/2013Market Performance |
| Municipal Bonds |
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S&P National Bond Index
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3.00% |
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S&P California Bond Index
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2.96% |
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S&P New York Bond Index
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3.13% |
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S&P National 0-5 Year Municipal Bond Index
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0.70% |
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| S&P/BGCantor US Treasury Bond |
400.09 |
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| Income Equities: |
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| Preferred Stocks |
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S&P U.S. Preferred Stock Index
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848.03 |
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S&P U.S. Preferred Stock Index (CAD)
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636.26 |
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S&P U.S. Preferred Stock Index (TR)
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1,701.05 |
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S&P U.S. Preferred Stock Index (TR) (CAD)
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1,276.26 |
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| REITs |
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S&P REIT Index
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174.07 |
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S&P REIT Index (TR)
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425.30 |
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| MLPs |
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S&P MLP Index
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2,469.58 |
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S&P MLP Index (TR)
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5,428.50 |
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See Data
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Is this the start of a lost decade for bonds? |
As shellshocked investors keep piling into fixed income, they may be adding another kind of risk
Investment News - July 25, 2010
As industry statistics continue to show that investors are favoring fixed-income funds over equity funds by a 3-1 ratio, it's clear that the past 10 years — a lost decade for stocks — continue to have a huge impact on individuals' investment decisions.
But given today's historically low interest rates, large budget deficits and the risk of finflation, one wonders whether investors are making this asset allocation choice at the beginning of what may ultimately prove to be a lost decade for bonds.
In particular, the fixed-income asset class most favored during the financial crisis for its safety and liquidity — the Treasury bond — may face an unusually high level of interest rate risk in today's environment because of its long duration.
Historically, the Treasury market has shown the highest price sensitivity to changes in interest rates because it provides the risk-free rate. Mortgage-related securities, high-grade corporate bonds, junk bonds and other sectors of the market pay investors higher yields than Treasuries to compensate for their credit risks and therefore do not move as much in price when interest rates rise or fall.
The price sensitivity of a bond also is affected by its “duration,” a calculation derived from a combination of factors, including the bond's maturity date and its “coupon,” or the interest rate it pays.
When long-term interest rates are near the low end of their historical range, as they are today, the duration of a bond is extended because it would take an investor longer to recoup the value of his or her investment at a lower interest rate.
And if durations are extended, the loss in value to a bond when interest rates rise can go up dramatically.
It's easy to see why investors embraced the Treasury market during the financial crisis. As mounting credit concerns dragged down other asset classes — equities, real estate, corporate bonds, municipal debt, even ultimately the money market — investors turned to what they considered to be the one safe alternative: the Treasury bond.
Now that the stock market seems to have confirmed that the threat of another Great Depression has passed and long-term government bonds yield less than 4%, you'd expect investors would be willing to put the “risk trade” back on and opt again for equities.
But the numbers suggest otherwise. Net flows to taxable-bond funds year-to-date through May 31 came to nearly $118 billion, versus $14 billion for stock funds, according to the Investment Company Institute.
Such is the legacy of a lost decade for stocks. As investors examine returns over the past 10 years for stocks versus bonds, in many cases, they see they are still underwater on their equity investments, whereas their fixed-income portfolios have generated respect-able single-digit annual returns and with much less volatility than stocks. And so they are sticking with bonds.
For the complete article visit InvestmentNews.com
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| Stuff to look at |
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| BondsOnline Advisor |
Income Security Recommendation January 2013 Issue.
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