| 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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Barclays: value in US corp bonds but wary of rates |
NEW YORK, Oct 8 (Reuters) - The easy gains are over in U.S. investment-grade corporate bonds but some "sweet spots" remain in lower-rated financial and industrial bonds, Barclays Capital said on Thursday.
Corporate bonds overall may grind out modest returns if interest rates remain low, but demand could dry up quickly once rates begin rising, Robert McAdie, Barclays' global co-head of strategy, said on a conference call.
"There are still pockets of upside to be had," McAdie said. "That said, I think the exploitation of that upside is going to have to become far more name-specific."
Investment-grade corporate bonds have rallied strongly this year as they retraced losses incurred in last year's financial crisis.
Corporate bonds' yield spreads over Treasuries, the extra compensation they offer for credit risk, have dropped dramatically from last year's record highs as the credit crisis eased.
Spreads on single-A-rated corporate bonds, a higher-quality category, are now just 41 basis points above their median since 1993, according to Barclays data.
By comparison, financial bonds with triple-B ratings, the lowest investment-grade category, are still 388 basis points above their long-term median, while triple-B industrial bond spreads are still about 109 basis points over their long-term median, McAdie said.
"The real extra potential for further upside really lies in triple-B financials, industrials," he said.
High-yield bonds are another sweet spot in fixed-income because they will benefit from a stronger economy and are less affected by rising interest rates than many other kinds of bonds, he said.
He recommends the higher-quality part of high-yield bonds, those with double-B ratings, which have lagged the rally in lower-quality bonds.
Overall, corporate bonds are benefiting from a rise in household savings, which are moving out of money market funds into bond funds, McAdie said.
The four-week moving average of inflows into taxable bond funds has surged to $6 billion from $1 billion at the start of the year, according to AMG Data Services.
Those flows could reverse quickly, however, if interest rates rise, McAdie said.
"I would argue a lot of money market money that's come into our market and retail (bond fund) money that's come into our market will be very fickle and will move out just as fast," he said.
Inflation expectations are low for now, keeping a lid on interest rates. One concern, however, is an estimated $1.5 trillion in Treasury bond issuance expected to hit the market next year, at the same time that the government begins draining some of the liquidity that helped ease the credit crisis.
"That's a factor that could be yield-negative clearly -- if we have too much supply coming into the system and they take the foot off the pedal in providing excess liquidity," he said. (Reporting by Dena Aubin; Editing by James Dalgleish)
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| Stuff to look at |
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S&P Commentary and Newsletters: S&P
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| BondsOnline Advisor |
Income Security Recommendation January 2013 Issue.
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