Howdy, Stranger!

It looks like you're new here. If you want to get involved, click one of these buttons!

In this Discussion

Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

    Support MFO

  • Donate through PayPal

Junk (corporate) bonds up 15 consecutive trading days

edited February 2015 in Fund Discussions
As measured by the Merrill Lynch High Yield Master II Index - a daily total return index. And today is looking like 16. It's been a slow plodding rise, but a rise nonetheless. In fact, YTD, the average open end junk bond fund has gained almost as much as for the entire year of 2014. Some of the funds less exposed to oil and gas issues have done much better. Junk's rise this week has come at the expense of the safer and mundane areas of Bondland ala Treasuires and munis.

Edit: Without checking, I believe February is shaping up to be the first month of out performance of junk corporates over junk munis since December 2013. And on a total return basis, junk munis are looking at their first monthly decline since 2013. But of course, we are still early in the month.

Comments

  • Dex
    edited February 2015
    @Junkster,
    What are you using to measure HY Muni Junk?
    Sometimes the beginning of the month is not a good time to judge bond performance. Back in the day there were people who would 'buy the dividend' buy a bond at the end of the month, get the dividend and then sell to make some $. That can be done with ETFs.
    http://finance.yahoo.com/echarts?s=NHMAX+Interactive#{"range":"ytd","scale":"linear"}
    http://finance.yahoo.com/echarts?s=HYD+Interactive#{"range":"ytd","scale":"linear"}
  • edited February 2015
    Dex, the price in the open end junk muni funds since the beginning of the month and the NAV of HYD and HYMB since the beginning of the month. And today is not looking good either for that sector. This may be much ado about nothing. But I couldn't ignore the action in the corporates.
  • edited February 2015
    Yes - most everything is up. The U.S. economy is smoking. Wage pressures are building too from the Dock Workers' slowdown on west coast and GM bumping some laborers into a much higher pay zone due to ramped up production. Than, Ford's adding workers. Brent crude's around $58 today after bottoming around $45 few weeks ago.

    Maybe this will put an end to the global deflation fear mongering.

    I bailed from junk way too early. But don't dislike them and you've done well. When I think of bonds, it's usually in the context of interest rate sensitive varieties (like govt. backed). As you know, junk reacts more to the health of the economy than it does to interest rates. The lower the tier of junk, the more this is true.

    Interested in Lockhert's speech today. Got a bit overweight in the oil sensitive equities as it was bottoming. (poor record-keeping on my part). So, using this week to lighten up a bit. Maybe another good day to off-load a little more. Still like the NR sensitive stuff going foreward. Just a matter of keeping the exposure reasonable for age, situation, etc.

    Thanks for all your contributions Junkster - which I always enjoy reading.

    ---

    Edit: Fed Gov. Lockhart threw cold water on the markets in today's speech in Naples, Fla as I rather expected. Sees possible rate increase in June. Ha. Not to be taken too seriously, but did turn around the markets in the PM. Gold in particular doesn't appear to like the prospect of higher rates. Having rough day.

  • Dex said:


    Back in the day there were people who would 'buy the dividend' buy a bond at the end of the month, get the dividend and then sell to make some $. That can be done with ETFs.

    I have tried the dividend capture strategy (buying just before ex-dividend date in order to collect the dividend) many times, both with ETFs and closed-end funds. Unless the share price rises substantially immediately after the ex-dividend date, you will make little or no profit on your trade when you sell, but will take a capital loss due to the ex-dividend drop in share price, and then you will pay taxes on the dividends you collected and pay transaction fees to your broker. It was always a futile strategy for me.
  • hank said:




    Edit: Fed Gov. Lockhart threw cold water on the markets in today's speech in Naples, Fla as I rather expected. Sees possible rate increase in June. Ha. Not to be taken too seriously, but did turn around the markets in the PM. Gold in particular doesn't appear to like the prospect of higher rates. Having rough day.

    Art Cashin would say the US 10 year bounce is part of the bottoming process or over bought.

    I think you are correct.

  • We can stop worrying - per Art Cashin

    Pros: Jan. jobs report not enough for Fed rates hike
  • Dex said:

    We can stop worrying - per Art Cashin

    Pros: Jan. jobs report not enough for Fed rates hike

    Markets are perverse and anticipatory. There was something more than meets the eye going on this week in the Treasuries/munis and the junk corporates. And it was all bad for the former and all good for the later.

  • Junkster said:


    Markets are perverse and anticipatory. There was something more than meets the eye going on this week in the Treasuries/munis and the junk corporates. And it was all bad for the former and all good for the later.

    the undoing of the deflation trade: oil up/treasuries (and other investment grade) are down, all interest rate related stocks (utes and reits) down and risk is up - equities higher, junk spreads are tighter. goldman's short basket is up 5.4% - called short squeeze. i wonder if this persists.
  • fundalarm said:

    Junkster said:


    Markets are perverse and anticipatory. There was something more than meets the eye going on this week in the Treasuries/munis and the junk corporates. And it was all bad for the former and all good for the later.

    the undoing of the deflation trade: oil up/treasuries (and other investment grade) are down, all interest rate related stocks (utes and reits) down and risk is up - equities higher, junk spreads are tighter. goldman's short basket is up 5.4% - called short squeeze. i wonder if this persists.
    Spot on and a very crowded trade. The 1% yield scenario suddenly became a little too embraced. And as you said "I wonder if this persists"

  • 15 days up and 1.35% gain?

    hmmm....

    1.35% gain every 15 tradings days...

    that is pretty good.

    at 252 trading days per year, that's eye-watering!

    me?

    today i watched one long-term holding go up 3% and two others down 3%.

    a different world.

    c
  • Charles, you are among the nicest and most down to earth posters on this board. You never speak ill and always even tempered (unlike me sometimes) and when your holdings have a bad day you don't try and hide or make excuses. I for one hope you prosper and thrive over the coming years and show that good guys can indeed finish first - contrary to the phase sometimes attributed to Leo Durocher that goods guys always finish last.
  • What Junkster said.
  • The corporate junk bond win streak continues. Merrill's H0A0 has been up for 24 consecutive days!
  • MOZART325 said:

    The corporate junk bond win streak continues. Merrill's H0A0 has been up for 24 consecutive days!

    Hopefully we can make it to 25 as in pre market trading it is looking ugly for oil today.
  • beebee
    edited February 2015
    M* agrees with Junkster regarding potential upside for HY Junk this year though it seems to disagree with Junkster's holding periods.

    "No matter which vehicle investors choose for high-yield exposure, it's crucial that they have a long holding period in mind, similar to what they might use for equity exposure, because of the volatility inherent in high-yield bonds. Morningstar's Bush says, "To use high yield well, investors need to hold through periods of volatility, or even buy into them, which could be the argument for certain parts of the market today. There isn't good evidence from fund flows that they've used these funds particularly well in the past."

    news.morningstar.com/articlenet/article.aspx?id=682752
  • edited February 2015
    bee said:

    M* agrees with Junkster regarding potential upside for HY Junk this year though it seems to disagrees with Junkster's holding periods.

    "No matter which vehicle investors choose for high-yield exposure, it's crucial that they have a long holding period in mind, similar to what they might use for equity exposure, because of the volatility inherent in high-yield bonds. Morningstar's Bush says, "To use high yield well, investors need to hold through periods of volatility, or even buy into them, which could be the argument for certain parts of the market today. There isn't good evidence from fund flows that they've used these funds particularly well in the past."

    news.morningstar.com/articlenet/article.aspx?id=682752

    I have always found the allure of the open end junk bond funds to be their trend persistency combined with their *very* low volatility.

    Edit: I should add that regarding volatility that is when this asset class is in a downtrend. Another allure of the open end is their one day lag effect. But that is a topic for another time.
  • Win streak is now up to 27. Has the Dow Jones Average ever been up 27 straight days?
Sign In or Register to comment.