FMD Capital Management

Posts Tagged: VCSH

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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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

Not All Short-Term Bond ETFs Are Cut From The Same Cloth

Written by David Fabian, July 08th, 2014

The popularity of short-term bond ETFs has continued to gain steam in 2014. In the wake of Federal Reserve taper fears and rising interest rates last year, many fixed-income investors flocked to these low duration funds in an attempt to shelter their portfolios from decline.

Short-term bond funds are considered attractive in a rising rate environment because of the inverse relationship between bond prices and bond yields. A fund with a lower overall duration will have a concomitant reduction in its total yield and less sensitivity to interest rates.

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5 Key Strategies for ETF Income Investors

Written by David Fabian, April 02nd, 2014

Almost no other category of investing has experienced as much turmoil in the last 12 months as income investors have been subjected to.  Interest rates have been on a roller coaster ride that has churned the landscape for core themes in fixed-income, REITs, preferred stocks, and even dividend paying equities.  Years of low volatility in many of these categories had lulled income seekers into a false sense of security that led to jolting changes in a short period of time. Read more

The Best ETFs To Navigate Choppy Interest Rate Waters

Written by David Fabian, October 25th, 2013

It has been a bumpy ride for income investors this year as the dreaded demon of rising interest rates has finally reared its ugly head.  From May through August, we saw a tremendous rise in the 10-year Treasury note yield which slashed bond prices and sent fixed-income investors fleeing for the relative strength of stocks or the safety of cash.

The talk about rising interest rates has cooled recently since the Federal Reserve’s decision in September to continue its current pace of asset purchasing.  This news ultimately sent bonds and other interest rate sensitive securities soaring as money flowed back into defensive minded sectors to take advantage of depressed prices and higher rates.  Speculation over the timing of the Fed changing its policies has many jittery bond investors worried about how they will ultimately hedge their current holdings or shift their portfolios to alternative asset classes.  Read more