FMD Capital Management

Posts Tagged: corporate bonds

ETF Investors Seek Shelter In Investment Grade Corporate Bonds

Written by David Fabian, March 07th, 2017

Rising interest rates are making many bond fund investors nervous about the prospects for weakening future returns and unstable risk dynamics.  This fear is putting some fuel behind ETF strategies that short Treasuries or sectors such as bank loans that have historically performed well in a rising rate environment.

The PowerShares Bank Loan Portfolio (BKLN), which invests in a basket of floating rate notes and senior loans, has accumulated more than $2.4 billion since the U.S. election.  That confidence has so far been rewarded with a steadily rising price trend versus the volatility that has pervaded most aggregate bond benchmarks.

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A Closer Look At Top Interest Rate Hedged ETFs

Written by David Fabian, November 22nd, 2016

Most investors purchase bond funds with a degree of interest rate sensitivity.  This is by design as they want to experience the off-setting effects of falling interest rates in exchange for capital appreciation of the underlying bond portfolio.  It’s a built-in risk mechanism that has been a successful diversification component when paired with stocks and other assets higher up the volatility scale.

Yet, after decades of falling rates, the long-term return expectations of many bond funds have fallen dramatically.  There is also growing concern that even a modest rise in Treasury yields will create a significant shift in the risk appetites of bond investors.  With so much anxiety surrounding the recent jump in interest rates, now may be a prudent time to explore the menu of bond ETFs with an embedded hedging component.

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The Yield and Duration Dance

Written by Michael Fabian, December 11th, 2015

The income landscape is changing and investors need to consider the embedded risk within their bond holdings to ensure they are situated with the right risk profile for the amount of yield they are receiving.  Unbeknownst to many casual investors that don’t track changes up and down the yield curve, short-term interest rates have been steadily rising since mid-2013. While widely followed yield statistics, such as the 10-year Treasury note yield, have largely traveled sideways.

This has become an important trend since investors who primarily stay within the confines of high quality or government bonds receive substantially more income by staying shorter on the yield curve than just a few years ago. Read more

The One Move You Have To Make For Your ETF Bond Portfolio In 2015

Written by Michael Fabian, December 12th, 2014

It’s been an amazing comeback year for the fixed-income markets following the interest rate volatility in 2013, especially in light of the sentiment statistics at the time calling for a steady rise for interest rates into 2015. As a result, I doubt that many investors would have thought we would breach the psychologically significant 2% mark on the 10-year Treasury note in 2014.  Read more

Why Income Investors Should Be Watching High Yield Bond ETFs

Written by David Fabian, July 17th, 2014

The Federal Reserve has mapped out its target for an October deadline to exit the quantitative easing measures that have helped stimulate the stock and bond markets for the last several years. The next step that economists are avidly trying to forecast is the timeline for additional fiscal tightening that could throw a wrench in the complacent market we have become accustomed to. Read more