Megaphone icon ETF Database is now VettaFi. Read More >
ETFdb Logo
ETFdb Logo
  • ETF Database
  • Channels
    • Active ETF
    • Alternatives
    • Beyond Basic Beta
    • China Insights
    • Climate Insights
    • Commodities
    • Core Strategies
    • Crypto
    • Disruptive Technology
    • Dividend
    • Dual Impact
    • Emerging Markets
    • Energy Infrastructure
    • Entrepreneur ETF
    • Equity ETF
    • ESG
    • ETF Building Blocks
    • ETF Education
    • ETF Strategist
    • Fixed Income
    • Future ETFs
    • Gold & Silver Investing
    • Innovative ETFs
    • Institutional Income Strategies
    • Leveraged & Inverse
    • Managed Futures
    • Modern Alpha
    • Multi-Asset
    • Multi-Factor
    • Nasdaq Investment Intelligence
    • Portfolio Strategies
    • Retirement Income
    • Smart Beta
    • Thematic Investing
    • Volatility Resource
  • Tools
    • ETF Screener
    • ETF Country Exposure Tool
    • ETF Sector Tracker Tool
    • ETF Database Categories
    • Head-To-Head ETF Comparison Tool
    • ETF Stock Exposure Tool
    • ETF Issuer Fund Flows
    • Indexes
    • Mutual Fund To ETF Converter
    • ETF Data for Journalists
    • ETF Nerds
  • Research
    • First Bitcoin ETF
    • ETF Education
    • Equity Investing
    • Dividend ETFs
    • Leveraged ETFs
    • Inverse ETFs
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Videos & Podcasts
    • ETF 360 Video Series
    • ETF Trends on Videos
    • ETF Trends on Podcasts
    • ETF Prime Podcast
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. Market Expert: Desire For Bonds is Far From Over
News
Share

Market Expert: Desire For Bonds is Far From Over

Ben HernandezNov 21, 2019
2019-11-21

The feeding frenzy on bonds in 2019 saw an unprecedented appetite for safe haven debt like Treasury notes, which subsequently pushed yields down to record levels. To some market experts, that appetite is just the tip of the iceberg.

“The bond phenomenon of 2019? I don’t think it’s over yet,” Jeff Kilburg, founder and CEO of KKM Financial, said on CNBC’s ETF Edge.

“How quickly it changes,” Kilburg added. “But that accommodative stance, no matter what your view is on the bond market, that has really been relevant. … This is the most money we’ve seen in the system in 10 years. So, I think that money has to work its way through and therefore, when you look at the 10-year note being under 2% still in comparison to some of the other foreign … percentages like the German bund, I still think it’s still attractive. If we do get to 2%, I think you see that rebalance come back in and buy those Treasurys.”

Additionally, strength in bond prices is also translating to strength in equities.

“People are starting to take those profits and move them into equities, where we’re starting to see kind of a warming equity market,” said Jay Jacobs, senior vice president and head of research and strategy at Global X ETFs. “I think the caution here is some of the equities that are more bond-like, like utilities, are very expensive, so people should probably look at the lower-valuation, cheaper-yielding stocks like in financials, where there’s better valuations, as a bond replacement.”

“It’d be interesting to see if we can actually have a rotation or simply book profits. We see a lot of registered investment advisors out there, active investors, trying to book those profits and find those sectors to rotate into,” he added. “We saw financials really get a jump, we saw industrials really get a jump, but it’s interesting about the bond market: I see a cap in the 2% yield on the 10-year note.”

With the Federal Reserve instituting its third straight rate cut, it opens up the possibilities of expansion in credit.

“The U.S. financial system is just so much better capitalized right now [than its European counterpart]and [has]such better strength. It’s really a play on the U.S. consumer,” Jacobs said. “We’ve seen a lot of good expansion of credit, a lot of opening of new bank accounts, things that are a positive for these banks in the U.S., and you just don’t see any of that in Europe right now.”


Content continues below advertisement

Bond ETFs for Those Concerned About a Resurgence in Inflation

With the Federal Reserve backing a looser monetary policy, bond ETF investors will have to contend with an eventual rise in inflation.

Market measures of inflation expectations have increased in recent weeks after receding fears of a near-term recession and growing preferences for riskier assets, the Wall Street Journal reports.

Based on the spread between the yields of 10-year U.S. government debt and Treasury inflation-protected securities of similar maturity, investors expectations for the average inflation rate over the next 10 years has risen to about 1.7 percentage points, compared to 1.55 percentage points at the end of last month. The so-called 10-year break-even rate also witnessed its largest six-day gain since November 2016 earlier in the week, jumping 17 basis points compared to the end of last month.

Investors now argue that the Federal Reserve’s recent move to cut interest rates three times this year have bolstered the outlook on inflation, with some even contending that inflation may rise fast enough to force the Fed to hike rates.

“If we let this run, some inflation will come back,” Rob Waldner, chief strategist and head of multisector portfolio management at Invesco, told the WSJ.

According to a recent Bank of America Merrill Lynch survey, nearly one-in-three fund managers anticipate inflation will accelerate in the next 12 months, compared to a near zero expectation in recent months.

Consumer prices in October were 1.8% higher year-over-year and higher than the 1.7% year-over-year increase seen in the previous two months. The consumer-price index was up 0.4% last month, according to the latest Labor Department update.

Bond investors who are worried that rising inflation will eat away at their real yields can look to bond ETF strategies to hedge against the negative effects of inflation. For example, Treasury inflation protected securities-related ETFs, like the iShares TIPS Bond ETF (TIP A), Vanguard Short-Term Inflation-Protected Securities ETF (VTIP A-) and Invesco PureBetaSM 0-5 Yr US TIPS Portfolio (PBTP), include exposure to TIPS, which provide protection from inflation since the principal of a TIPS bond rises along with inflation but decreases with deflation as measured by the Consumer Price Index. Furthermore, the fixed interest rate is applied to the adjusted principal, so interest payments rise with inflation and fall with deflation.

This article originally appeared on ETFTrends.com.

» Popular Pages

  • Tickers
  • Articles

Jun 24

As Inflation Rises, Try Equal Weighting Equity Holdings

Jun 24

Cybersecurity Investments Could be an Opportunity

Jun 24

Diversifying During Rate Hikes With a Real Estate ETF

Jun 24

Don't Ever Bet Against the S&P 500

Jun 24

Have We Reached Rock Bottom?

Jun 24

Coinbase Poised to Launch Derivatives Product

Jun 24

Any Time is the Right Time to Begin Investing

Jun 24

American Century’s Sandra Testani

Jun 24

Exxon Demands Higher Carbon Tax: This Fund Benefits

Jun 24

Gender Matters When it Comes to Retirement Planning

QQQ

Invesco QQQ Trust

SPY

SPDR S&P 500 ETF Trust

VOO

Vanguard S&P 500 ETF

ARKK

ARK Innovation ETF

VTI

Vanguard Total Stock Market...

XLE

Energy Select Sector SPDR...

VYM

Vanguard High Dividend Yield...

IVV

iShares Core S&P 500 ETF

SCHD

Schwab US Dividend Equity ETF...

XLK

Technology Select Sector SPDR...


Content continues below advertisement

Loading Articles...
Help & Info
  • Contact Us
  • Mission Statement
  • Press
Tools
  • ETF Screener
  • ETF Analyzer
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Performance Visualizer
  • ETF Database Model Portfolios
  • ETF Database Realtime Ratings
  • ETF Database Pro
More Tools
  • ETF Launch Center
  • Financial Advisor & RIA Center
  • ETF Database RSS Feed
Explore ETFs
  • ETF News
  • ETF Picks of the Month
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Best ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Legal
  • Terms of Use and Privacy Policy
  • © ETF Flows LLC
Follow ETF Database
Follow ETF Database

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

ETF Education Channel

How to Allocate Commodities in Portfolios

Tom LydonApr 26, 2022
2022-04-26

A long-running debate in asset allocation circles is how much of a portfolio an investor should...

Core Strategies Channel

Why ETFs Experience Limit Up/Down Protections

Karrie GordonMay 13, 2022
2022-05-13

In a digital age where information moves in milliseconds and millions of participants can transact...

}
X