Treasurys Rally, Sending 10-Year Yield To 2014 Low FYI: Copy & Paste 5/28/14: Cynthia Lin: WSJ
Regards,
Ted
A roaring rally in the prices of U.S. and European government bonds sent yields on Treasurys and other ultrasafe debt to 2014 lows, underscoring continued investor uncertainty over the pace of global economic growth.
In late afternoon trading, the 10-year U.S. Treasury note was up 21/32 in price to yield 2.443%, according to Tradeweb. The yield sank as far as 2.432%, its lowest level since June 2013. Bond yields fall when prices rise.
Demand was equally strong across the Atlantic, amid expectations that the European Central Bank could loosen monetary policy as soon as next week. The yield on 10-year German bunds fell 0.05 percentage point to 1.285%, the lowest since May 2013. The yield on 10-year U.K. gilts fell 0.09 percentage point to 2.549%.
Traders said the rally was driven by a surprise uptick in Germany's unemployment as well as typical month-end buying by fund managers to better align their portfolios with underlying indexes. A Treasury price rally in 2014 that has brought the 10-year yield down from 3% at the end of 2013 has left many fund managers holding smaller positions in U.S. debt than market benchmarks.
"The buying [in U.S. Treasurys] is being driven by relative value, rather than a need for yield," said Jake Lowery, portfolio manager at Voya Investment Management. "Global fixed income looks relatively expensive" compared with U.S. Treasurys.
Mr. Lowery points to the yield difference between U.S. and German 10-year debt. The U.S. offers about 1.15 percentage point in extra yield versus Germany, a historically large premium.
The wave of bond buying is the latest chapter in a yearlong government-bond rally that has surprised many investors and unexpectedly made safe debt one of the strongest-performing asset classes in financial markets.
Wednesday's rally wasn't limited to debt perceived as safest by investors. Yields on bonds issued by economically weaker European nations such as Spain, Italy and Portugal also declined. Spain's 10-year yield fell as far as 2.793%, a record low.
"We've had a rally in some other sovereign debt markets, making Treasurys look cheaper," said Gary Pollack, head of fixed-income trading at Deutsche Bank's private wealth-management u
Wednesday's Treasury gains add to Tuesday's rally in the face of upbeat U.S. economic data and fresh supply hitting the market. The fact that yields hover around the year's lows while U.S. economic data has been improving and growth is widely expected to accelerate has many bond analysts scratching their heads.
"We, who are usually some of the most bullish in the herd, are having a hard time reconciling generally OK data" with falling yields, said David Ader, government bond strategist at CRT Capital Group.
Many analysts point to the heavily skewed net trading position at the start of the year, with many investors betting Treasury prices would fall as the economic recovery picked up pace. Those bets were hit by a U.S. slowdown last quarter, causing many to unwind the so-called shorts.
"The market in general has been caught off guard by the strength in Treasurys this year," Mr. Pollack said, adding that he doesn't see yields sinking much further from here. Like many others, Mr. Pollack sees the 10-year yield ending the year around 3% as U.S. growth accelerates into year-end.
With many sellers crowded around the 2.42% mark on the 10-year note, traders don't see the yield falling significantly past that point without a new round of soft data.
J.P. Morgan's weekly Treasury client survey showed short positions ramping back up to 35% from 24% last week. Neutral positions fell from 66% to 48%, reflecting the fewest fence-sitters since October 2010.
A five-year Treasury auction Wednesday attracted mediocre demand, offering buyers the lowest yield on that maturity in six months. That followed a weak turnout at Tuesday's two-year note sale.
The soft auctions show how there are limits to the seemingly insatiable demand for U.S. Treasurys. While investors question the outlook on global growth, data at home have been improving, which raises worries among bond investors about the Federal Reserve increasing rates.
Fed officials, including Atlanta Fed President Dennis Lockhart overnight, have assured that rates will remain low for some time to come to support the economy. But should growth accelerate and inflation perk up, the rally in bonds now only sets up risks for a bigger selloff later on.
Rate-increase expectations for now are centered around mid-to-late 2015.
Help requested: SC/MC value funds Market Capitalization Size % of Portfolio Benchmark Category Avg
Giant 0.39 0.26 4.22
Large
5.19 28.
56 14.
53
Medium 48.38 6
5.48
57.93
Small 32.62
5.66 23.16
Micro 13.41 0.04 0.16
@ron, OP seems to be looking for value funds.
I don't know if there is an extended market value index fund. That would fit the bill IF the goal of the OP is pure and full market exposure with no downside protection. Or a combination of mid cap value and small cap value index funds if which there are plenty.
But since, the original question is under-specified (need a Cabernet/Merlot) in requirement, it allows for creative interpretations to fit one's own pet fund. :-)
Is Your Large-Cap Fund A Closet Indexer ? This is so true in large cap domestic and international stock funds. Folks often think active share means how much turnover a fund has. But it really has to do with how different the fund's holdings are from its benchmark. Typically of M* to not make the information available except to subscribers of its most expensive software. But also understand that the fund's benchmark (as stated in the prospectus and/or annual report) might be different than what M* uses. Using active share statistics to compare similar funds is one thing. But keep in mind that some great funds are not style-box driven. OSTFX, for example, uses the S&P 500 benchmark, but it only has about 40 holdings, and more than 50% are in mid-and-small cap stocks. Average market cap, in this case, does not help much. Same for GSRLX, which has only 50 holdings, but 20% is in MLPs, and about 15% is in foreign stocks. So it's pretty clear this fund's active share number is very high compared to the Russell 1000 Growth, but the fund is definitely not even remotely similar to that index.
There are, however, any number of large cap funds that get a lot of cash flow but provide very little benefit, often none at all, over an index fund. It seems clear to us that smaller funds with concentrated portfolios, usually style-box agnostic, are often the best options for investors wanting real active management.
The Slowskys Ever since 4:4
5 AM CST, I've struggled to link article to the MFO Discussion board.
Regards,
Ted
Nasdaq Nears 13-Year High As Technology Becomes Loved
Replacement for UMBMX
Dennis Gartman: We Were Wrong In Calling for A Correction
Replacement for UMBMX UMBMX has actually been pretty tame (on the downside) for an equity fund since its inception, while more than doubling SP
500 total returns...I'd consider it better than "half decent":
Laszlo Birinyi: S&P 500 To 1970 This Year @Ted, re leverage, if you can't hunt with the big dogs, stay on the porch. :-)
My leveraged funds - QLD 2.
52% (8.1% up since purchase), GLL 4.30% today.
Laszlo Birinyi: S&P 500 To 1970 This Year For all the Bulls,two scoops instead of three.After all,Hogs are known to get slaughtered.
From Seeking Alpha
Direxion will launch a 2X leveraged ETF tomorrow
May 27 2014, 16:
55 ET
Direxion has updated its filing on the Daily S&P
500 Bull 2X Shares (SPUU) and plans to roll out the fund on May 28th.
Originally planned as the Direxion Daily Large Cap Bull 2X Shares with the proposed ticker of SFVL, SPUU will now track double the returns of the S&P
500.
The issuer is probably best know for its 3X leverage offerings and SPUU will be the first of its ETFs to offer 2X exposure.
ETFs tracking the S&P
500: SPY, SH, SSO, SDS, VOO, IVV, SPXU, UPRO, SPXL, RSP, RWL, EPS, BXUB, SFLA, SPLX, BXUC
http://seekingalpha.com/news/1772243-direxion-will-launch-a-2x-leveraged-etf-tomorrow?uprof=46Speaking of slaughter, my precious metal holdings down 3-6 % today. Tocqueville Gold Fund 37.61
- $1.33
-3.42%
The Closing Bell: S&P 500 Closes At Record @Charles: I'm more confident that ever that the S&P
500 will be up 1
5% from it's 2013 close of 1842 at year-end.
Regards,
Ted
The Closing Bell: S&P 500 Closes At Record Ha!
And BAC had a good day too...back above $15...let's hope to stay!
Thanks Ted.
The Closing Bell: S&P 500 Closes At Record
Laszlo Birinyi: S&P 500 To 1970 This Year
Help requested: SC/MC value funds VXF is your best choice for both.
Suitability
Vanguard Extended Market Index ETF is a suitable core holding for investors who want to complement a U.S. large-cap equities allocation with exposure to mid-cap, small-cap, and micro-cap stocks. This exchange-traded fund tracks the S&P Completion Index, which holds nearly the entire U.S. market, except for those stocks already in the S&P 500 Index. Its constituent companies are widely diversified across sectors and the value-growth spectrum. For those looking to control their market-cap exposure, this fund works well with an S&P 500 Index fund such as Vanguard S&P 500 ETF to cover the range of U.S. stock market capitalizations with minimal holdings overlap.
Dividend-Yielding Stock Are Paying Off Now @Kaspa - I'm trying to think of any reason(s) for investing in HDV. However, it concerns me when this portfolio pays out a dividend of only 3.06% while 17 of their top 2
5 holdings yield more than, or equal to in one instance, that on their own. 7 of the 2
5 are a full percentage point or more above the combined stated yield with 3 of those contained within their top ten holdings.
Granted, there's an advantage to monitoring only one holding and you only have one set of transaction costs versus 2
5 so that helps. You also get some diversification across sectors but where is the rest of the yield going? I also think that the ER could be cut at least by half and they'd still do alright.
14 Ways To Invest For Income Without Stocks No arguments. "Our favorite emerging-markets debt fund is Fidelity New Markets Income (FNMIX)--- a member of the Kiplinger 25. Longtime manager John Carlson focuses on dollar-denominated debt, a more stable way to invest in these securities because foreign currencies tend to be volatile. Over the past decade, New Markets Income returned 9.2% annualized, beating its typical peer by an average of 1.2 percentage points a year."
Yet, PREMX beats FNMIX by a nose over 10 years, 9.2% (FNMIX) vs. 9.88% for PREMX.
