It’s time for investors to focus on Treasuries. As stocks tumbled 3% yesterday, Sinead Carew wrote at Reuters: NEW YORK (Reuters) - U.S. stocks tumbled on Wednesday, with the S&P 500 marking its biggest daily decline since Feb. 8, and technology stocks led the losses as rising U.S. Treasury yields sent investors fleeing from risky assets. The Dow Jones Industrial Average .DJI fell 831.83 points, or 3.15 percent, and the Nasdaq Composite .IXICdropped 315.97 points, or 4.08 percent, to 7,422.05. Read more here. … [Read more...]
Young Research & Publishing has been providing research and insights on bonds to institutional investors, corporate financial officers, business owners, and individual investors for over four decades. Richard C. Young started Young Research & Publishing in the 70s to publish the authoritative Young’s World Money Forecast, a 50-page monthly investment report for institutional land high net worth investors. Today, our research on bonds is geared toward investors in or nearing retirement who are looking to preserve and protect wealth.
Can Bonds Restore Health to the Market?
James Mackintosh, writing in The Wall Street Journal, explains that as the term premium rises on bonds, hardest hit could be the so-called "acronym stocks," also known as the FAANGs. With rates on Treasuries rising, the discounted future profits of these tech giants look less attractive to investors. Mackintosh gives investors in the FAANGs three reasons to worry, writing: There are three reasons to worry. The first is that the acronym stocks— Facebook, Amazon, Apple, Google parent Alphabet, Netflix, Microsoft and others arranged into the FANGs, FAAMGs and so on—flew too high, and will now … [Read more...]
As Tech Invests its Cash, Who Will Buy Bonds?
For years tech companies with vast overseas cash reserves have invested their wealth in the short-term debt of other corporations. But now that Apple and other companies are taking advantage of tax reform to bring home cash held abroad, the demand for that short-term corporate debt is drying up. Bloomberg's Molly Smith reports: Once the biggest buyers of short-dated corporate debt, Apple along with 20 other cash-rich companies including Microsoft Corp. and Oracle Corp. have turned into sellers. While they once bought $25 billion of debt per quarter, they’re now selling in $50 billion clips, … [Read more...]
Your Retirement Life: Do You Understand the Value of Bonds?
If you haven’t constructed your bond portfolio yet, then what are you waiting for? Once you’re in your 50s, the time has come to own some bonds. Consider bonds your anchor to windward. Determining how much you, not your neighbor, needs in bonds is a most personal equation. Only you and your spouse and hopefully your advisor know the right mix for you. Period. Unfortunately, those well into their golden years who put off bonds paid a devastating price in the two stock market crashes so far this century. So what are you waiting for? Imagine how you’ll feel in the third stock … [Read more...]
CEO of World’s Biggest Bank Warns of 5% Treasury Yields
Jamie Dimon, the CEO of JP Morgan recently warned that the prospect of 5% 10-year Treasury yields is a higher probability than most people think. And may it happen. A 5% 10-year Treasury yield would be a welcome development for income investors, savers, and retired investors who have suffered through a decade of ultra-low yields. “I think rates should be 4 percent today,” Dimon said Saturday at the Aspen Institute’s 25th Annual Summer Celebration Gala. “You better be prepared to deal with rates 5 percent or higher - it’s a higher probability than most people think.” The 3 percent level is … [Read more...]
Will You be Ready When the Stock Market Crashes?
Facebook and Twitter shares both cratered this week. It may be time to ask yourself, as I did here on January 17, 2018, are you ready for when the stock market crashes? When the stock market crashes, there will have been plenty of opportunities for you to prepare for it. But that’s easier said than done. Because to do so you need to go against the grain. For example, bond investors are getting a blast of Arctic air as interest rates march higher. Prices are down. But does that mean it’s time to sell? No. The key to weathering this bond chill is to remember why you own bonds in the … [Read more...]
Who is Buying Long Bonds Today?
Thirty-year Treasuries yield 3.11% today. Ten-year Treasuries yield 2.97%. You get an extra 0.13% in income each year for lending the government money for an additional 30 years. Sounds like a raw deal. Not according to some institutional investors as reported here by the FT. The 30-year or “long bond”, currently yielding 3.10 per cent, is attractive for so-called buy and hold investors such as pension funds and insurers who need to offset lengthy liabilities over the coming decades. A steady rise in yields from below 2.70 per cent in December has been accompanied by stronger demand at … [Read more...]
Sentiment on Junk Bonds Nearing Mania Threshold
Only two times before has the ratio of junk bond yields to high-grade bond yields been lower than it is now. Those two instances preceded the Asian market crisis, and the global financial crisis. Bloomberg's Sid Verma and Cecile Gutscher report: According to a key valuation metric, investors are headed for the kind of bullishness on high-yield bonds that’s been seen just twice before: during the halcyon days of 1997’s tech bubble before the Asia crash, and on the eve of the global financial crisis a decade later. The ratio between U.S. junk-bond yields and their high-grade counterparts has … [Read more...]
Goldman Warns on Junk Bonds
Goldman Sachs is warning that the lower rated rungs of the junk bond universe are the most overpriced since 2007. Bonds rated CCC and below have one of the highest probabilities of default. Goldman estimates the credit-risk premium for CCC obligations has sunk to a negative 53 basis points, "even under a fairly optimistic assumption of no recession for the next five years." That’s the lowest level since before the financial crisis, when the CRP touched negative 420 basis points in June 2007, at the height of the froth in the global debt market. It suggests investors are likely accepting … [Read more...]
Highest Corporate Bond Yields in Five Years
Cecile Gutscher writes at Bloomberg that corporate bonds are offering their highest yields in years: You need to rifle through 18 years of history to find selloffs that compare to the one corporate bond investors are now enduring. Debt of American companies just posted their third-worst 100-day returns since 2000, according to a JPMorgan Chase & Co. index, as tighter monetary conditions leave their mark on high-quality bonds with longer maturities. With negative returns likely to scare off retail investors, the outlook for the asset class looks grim, JPMorgan strategists said in a … [Read more...]
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