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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.

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Bloomberg Real Yield

135

Comments

  • edited January 2023
    @AndyJ,

    Thanks for the link to yesterday's show.
    This is one of two Real Yield episodes on YouTube labeled 01/20/2023.
    Perhaps someone cut & paste the title but forgot to change the day?
  • Although a graphic below the video image notes 1/20/2023; this is the Friday program this week, as I watched in 'real time'. @Crash, you may search BNN and the words 'Real Yield'.
  • @catch22 thanks. I have it from @AndyJ's link. :)
  • edited January 2023
    From the show: 2023 is best start to the year for CCC rated debt since 2003. Twenty years. Nevertheless, I think out of a sense of professional prudence, they like IG better. The point was made, however, that the quality of junk bond companies is stronger, better situated than in past years.
  • edited January 2023
    @Crash, right, that speaker said the indexes are higher quality now than they were (even a year ago, I think he said (?)). Checked HYG on that; it's slightly more than half BB now, and IIRC, it was solidly B the last time I looked many months ago. The companies with newer issues are apparently in halfway decent shape, at least comparatively within the below investment grade zone.
  • All 3 guests expect 10 yr Treasury to hit 4% before 3%. Currently right in the middle at 3.5%.
  • 10 Feb, 2023:
  • 24 feb, '23.
  • edited February 2023
    The one guy - the one who showed up late - brought up an idea I hadn't heard from any of the guests anytime at least lately - floating rate IG. That one goes on the research list. (IIRC, an MFO poster mentioned FR IG sometime back, but the etf he was touting didn't have a great record (or yield). From a quick look, there are a few options.

    Edit: there are several, most with strong volume, which surprised me. May not be a lot of upside to them, just very low positive return when rates are going up. A few I looked at are Treasury FR (USFR, TFLO); two with mostly corp with some Treasuries (FLOT, FLRN); and Janus Henderson, which has a somewhat interesting one: a AAA CLO FR etf (JAAA). Overall, a bit underwhelming.
  • Last week, 4% rate on 10-year Ts was predicted by the guests, before we see 3% again. Almost there.
  • 03 March, 2023:
  • Thanks, @Crash, I'd fogotten about RY this week. One of the guests made a pitch for shorter duration corporates barbelled with the 10y Treasury. Interesting, but not for moi when 6m and 1y Ts are paying 5%. If 2y or 3y Treasuries cross 5%, I'll be in with a lot more than spare change.
  • edited March 2023
    AndyJ said:

    Thanks, @Crash, I'd fogotten about RY this week. One of the guests made a pitch for shorter duration corporates barbelled with the 10y Treasury. Interesting, but not for moi when 6m and 1y Ts are paying 5%. If 2y or 3y Treasuries cross 5%, I'll be in with a lot more than spare change.

    Word up! :)
    I'm in (TIPs) SCHP. Duration average is 6.59. playing the middle, but leaning into longer durations.....12-month yield currently: 6.93%. Yes, a fund is not the same as actual Ts. :)
    Super-low ER, though. Brings another smile. :)

  • Hmm. I'll start watching SCHP too.
  • March 10 edition, with a new host.

    Lightning round agreement: it's IG over HY, and duration risk over credit risk.
  • I enjoyed that. Sonali Basak is a regular. Smart. Thanks, AndyJ.
  • And Katy is back.
    17 March, 2023.
  • edited April 2023
    March 31 edition. This isn't the same old-same old of the past couple of months; there's plenty of new discussion: extend duration or not, even if current longer duration yields don't look great right now, they likely will later; extent of tightening impact of the regional bank crisis; MBS in favor, on and on.

    Kelsey Berro seems to be one of the best analysts who've been on the program for a while.

    Note to self: time to think more about where the puck is headed instead of where it is and where it's been.
  • +1.
    Thanks, AndyJ.
  • edited April 2023
    14 April, 2023:
    https://www.bloomberg.com/news/videos/2023-04-14/-bloomberg-real-yield-04-14-2023
    Thumbs-up on short-dated TIPs. The jury is out on whether Fed will hike by .25% next time. Short-duration Treasuries and corporates, yes.

    It's all about prudence and safety.
    But G. Bory says extending duration by now does make sense. (Still not talking about junk. Later in the show, he asserts he selectively likes junk). Rodilosso finds junk and corporates "relatively attractive," particularly BBs.

    Video clip: O'Connor Juanas of UBS: IG fixed income and Treasuries look particularly good. Reduced risk, decent yield, currently.
    Near the end, the "footer" proclaims: "Junk's longest winning run in 3 months."





  • edited April 2023
    Thanks, @Crash, had forgotten to look up this week's show. Interesting stuff -- noted especially the comment about duration ~ 5 as the sweet spot for adding duration per Bory. I'll have to do some figuring on that -- maybe a BND or BOND with a shot of a short duration fund would be in that ballpark, if he's right.

    Rod's comment about the 2y T yield being too low for the situation was also interesting. (The 2y pretty well tracks with the Fed rate over time, but right now, it sure isn't.) Wouldn't mind locking in a large chunk of 5% 2y Treasury yield; my early T bills are maturing and more cash is building at 4.45% mm rate, which will not be there forever.
  • 28th April, 2023:
  • The movement of the short and long duration yields is independent to each other. The longer end is determined by the market while the short end is controlled by the FED’s rate. It is counterintuitive to extend duration toward the intermediate duration, ~5-7 years. Treasury yield curve is still inverted and the probability of having 2yr yield at 5% is nearly nil. However, IG bond funds with short- and intermediate- duration are yielding 5%.

    Next week, the FED is likely to hike another 25 bps rate. In light of the banking turmoil, that may be the last rate hike the rest of the year. I think it is too optimistic to expect the FED to cut rate soon unless the economy falls into s severe recession.
  • edited April 2023
    Next week, the FED is likely to hike another 25 bps rate. In light of the banking turmoil, that may be the last rate hike the rest of the year. I think it is too optimistic to expect the FED to cut rate soon unless the economy falls into s severe recession.

    I think that's right. About the rest of your post:
    I'm holding intermediate-term junk.
    Effective duration on PRCPX is down to 3.41 years. I just checked. The portfolio manager has moved shorter than before. Yield = 6.03%.

    TUHYX effective duration =4.15 years. Yield = 6.62%.
    I'm still enjoying the ride. Share price has crept up, too.
    Source: Morningstar.
  • edited April 2023
    Intermediate duration is doing pretty well recently ... in funds. And, @Sven, if you were responding to my older post, I think my language wasn't clear enough: I realize 5% in a 2y is not happening. The point is that under more normal circumstances, the 2y runs fairly closely along with the Fed rate, and we are far from normal circumstances.

    A 1y in the high 4's (~ 4.8 now), though, is pretty attractive for part of an FI portfolio if you assume short rates will be falling over time, and even 4.02 for a 2y wouldn't be all that bad under those circumstances. A combination of some HTM T's of 1y or longer (including some higher-yielding shorter term T's for current safe yield) with a fund or funds for good yield and possible cap gains, or at least limited risk of loss, wouldn't be a bad approach.
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