July 22, 2016

Jason Zweig of the Wall Street Journal has some good advice for fixed income investors in a piece titled Investors: Do the Hard Thing, Don’t Do the Easy Thing:

The reach for yield is becoming a reckless lunge.

While high-quality bonds still have their place, too many investors are buying high-risk bonds instead.

Since June 30, according to TrimTabs Investment Research, a firm in Sausalito, Calif., that tracks how money moves in and out of the financial markets, investors have poured $1.2 billion into exchange-traded funds specializing in bonds from emerging-market countries. So far in July, investors have pumped another $2.8 billion into high-yield ETFs holding so-called junk bonds issued by below-investment-grade companies.

Put simply, one out of every 14 dollars invested in those two fund categories arrived in the past three weeks.

The easy thing is to submit to your worst instincts and reach for riskier investments that pay higher income — for now.

What is hard is to be patient and ornery. As bonds yield less, save more. Remember that you can get higher yield only by buying longer-term or lower-quality bonds — which will also raise your risk. With interest payments so low, long-term bonds are particularly vulnerable to an unexpected rise in rates.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 -0.3251 % 1,660.2
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.3251 % 3,032.9
Floater 4.95 % 4.72 % 89,848 16.01 4 -0.3251 % 1,747.9
OpRet 4.84 % -0.17 % 45,000 0.11 1 0.6362 % 2,849.3
SplitShare 5.11 % 5.41 % 98,639 2.31 5 0.1448 % 3,368.0
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1448 % 2,627.8
Perpetual-Premium 5.47 % 1.62 % 83,037 0.28 12 0.1614 % 2,686.7
Perpetual-Discount 5.22 % 5.14 % 101,921 15.07 26 0.1658 % 2,838.2
FixedReset 5.00 % 4.34 % 151,499 7.14 88 0.6438 % 2,034.4
Deemed-Retractible 5.00 % 3.17 % 125,421 0.09 33 0.1454 % 2,777.0
FloatingReset 2.90 % 4.40 % 31,964 5.15 11 0.4780 % 2,145.4
Performance Highlights
Issue Index Change Notes
SLF.PR.J FloatingReset -1.13 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 12.26
Bid-YTW : 11.42 %
BAM.PR.R FixedReset 1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 16.05
Evaluated at bid price : 16.05
Bid-YTW : 4.67 %
CM.PR.P FixedReset 1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 18.72
Evaluated at bid price : 18.72
Bid-YTW : 4.10 %
RY.PR.M FixedReset 1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 19.97
Evaluated at bid price : 19.97
Bid-YTW : 4.18 %
TD.PF.D FixedReset 1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 20.39
Evaluated at bid price : 20.39
Bid-YTW : 4.27 %
RY.PR.Z FixedReset 1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 19.05
Evaluated at bid price : 19.05
Bid-YTW : 3.96 %
BNS.PR.E FixedReset 1.09 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-25
Maturity Price : 25.00
Evaluated at bid price : 26.80
Bid-YTW : 3.83 %
RY.PR.H FixedReset 1.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 18.84
Evaluated at bid price : 18.84
Bid-YTW : 4.06 %
SLF.PR.I FixedReset 1.14 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.71
Bid-YTW : 7.58 %
RY.PR.R FixedReset 1.14 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-08-24
Maturity Price : 25.00
Evaluated at bid price : 26.78
Bid-YTW : 3.87 %
BNS.PR.B FloatingReset 1.19 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.18
Bid-YTW : 4.40 %
BAM.PF.A FixedReset 1.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 19.59
Evaluated at bid price : 19.59
Bid-YTW : 4.72 %
BAM.PF.F FixedReset 1.27 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 20.00
Evaluated at bid price : 20.00
Bid-YTW : 4.64 %
TRP.PR.C FixedReset 1.36 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 12.67
Evaluated at bid price : 12.67
Bid-YTW : 4.37 %
BAM.PF.B FixedReset 1.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 18.19
Evaluated at bid price : 18.19
Bid-YTW : 4.76 %
HSE.PR.A FixedReset 1.44 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 11.97
Evaluated at bid price : 11.97
Bid-YTW : 5.03 %
RY.PR.J FixedReset 1.45 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 20.37
Evaluated at bid price : 20.37
Bid-YTW : 4.21 %
BAM.PF.E FixedReset 1.53 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 19.20
Evaluated at bid price : 19.20
Bid-YTW : 4.54 %
BNS.PR.R FixedReset 1.54 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.39
Bid-YTW : 3.63 %
MFC.PR.N FixedReset 1.55 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.96
Bid-YTW : 7.30 %
PWF.PR.T FixedReset 1.56 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 20.16
Evaluated at bid price : 20.16
Bid-YTW : 3.94 %
CU.PR.C FixedReset 1.58 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 17.40
Evaluated at bid price : 17.40
Bid-YTW : 4.51 %
FTS.PR.H FixedReset 1.68 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 13.96
Evaluated at bid price : 13.96
Bid-YTW : 3.95 %
TRP.PR.A FixedReset 1.69 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 15.05
Evaluated at bid price : 15.05
Bid-YTW : 4.54 %
BAM.PF.G FixedReset 1.84 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 20.49
Evaluated at bid price : 20.49
Bid-YTW : 4.56 %
MFC.PR.M FixedReset 1.87 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.09
Bid-YTW : 7.27 %
TRP.PR.G FixedReset 2.58 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 19.90
Evaluated at bid price : 19.90
Bid-YTW : 4.66 %
Volume Highlights
Issue Index Shares
Traded
Notes
MFC.PR.J FixedReset 199,600 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.56
Bid-YTW : 6.93 %
FTS.PR.K FixedReset 79,825 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 18.11
Evaluated at bid price : 18.11
Bid-YTW : 4.03 %
MFC.PR.F FixedReset 68,001 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.26
Bid-YTW : 9.72 %
NA.PR.A FixedReset 65,811 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-08-15
Maturity Price : 25.00
Evaluated at bid price : 26.21
Bid-YTW : 4.48 %
RY.PR.E Deemed-Retractible 44,700 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-08-21
Maturity Price : 25.00
Evaluated at bid price : 25.07
Bid-YTW : -3.82 %
BNS.PR.Q FixedReset 40,065 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.93
Bid-YTW : 3.75 %
There were 34 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
TRP.PR.E FixedReset Quote: 18.50 – 18.92
Spot Rate : 0.4200
Average : 0.2868

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 18.50
Evaluated at bid price : 18.50
Bid-YTW : 4.36 %

TRP.PR.D FixedReset Quote: 17.93 – 18.24
Spot Rate : 0.3100
Average : 0.2080

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 17.93
Evaluated at bid price : 17.93
Bid-YTW : 4.44 %

RY.PR.W Perpetual-Discount Quote: 24.80 – 25.06
Spot Rate : 0.2600
Average : 0.1647

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 24.55
Evaluated at bid price : 24.80
Bid-YTW : 4.93 %

PWF.PR.T FixedReset Quote: 20.16 – 20.54
Spot Rate : 0.3800
Average : 0.2936

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 20.16
Evaluated at bid price : 20.16
Bid-YTW : 3.94 %

FTS.PR.H FixedReset Quote: 13.96 – 14.34
Spot Rate : 0.3800
Average : 0.2977

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2046-07-22
Maturity Price : 13.96
Evaluated at bid price : 13.96
Bid-YTW : 3.95 %

NA.PR.X FixedReset Quote: 26.50 – 26.69
Spot Rate : 0.1900
Average : 0.1214

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-05-15
Maturity Price : 25.00
Evaluated at bid price : 26.50
Bid-YTW : 4.15 %

One Response to “July 22, 2016”

  1. BarleyandHops says:

    poured $1.2 billion into exchange-traded funds specializing in bonds from emerging-market countries

    When looking at such ETFs, I always look at the geographic diversity of the fund beyond the returns over the course of time, credit quality, duration. To me, diversity gives me an idea of the risk appetite of the manager.

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