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Tag Archives: bonds

May 24, 2023

A Quick Look at Key USD Indices and Fixed Income ETF Flows This Year

2022 marked a full year of rate hikes, unprecedented since the Global Financial Crisis, which propelled short-term yields upward and in turn ultimately caused the 10-2 spread1 to fall below zero in the second half of 2022, where it has since stayed. Recent market expectations suggest that the end of rate rises is perhaps in…

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Mar 21, 2023

Indexing Bond and Commodity Markets in the World of the Upside Down

In the 80s nostalgia Netflix hit series “Stranger Things,” the town of Hawkins is haunted by an alternate world beneath. The protagonists battle monsters in what they call the upside down. For the first few seasons, the upside down wreaks havoc on just a few residents of Hawkins. By the last season, no one is…

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Dec 13, 2022

Paying Dividends: Measuring Rising Income against Declining Risks in the iBoxx Fixed Income Indices

With the ZIRP world1 firmly in the rear view, the “income” in fixed income is back. As yields collapsed to record lows, income-starved investors sought alternative sources of income such as dividend strategies, which attracted record flows in related products throughout 2022. Now, with investment grade bond yields hitting as high as 6%, bonds are…

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Sep 13, 2022

Defense and Volatility

As the equity market has waned and waxed in 2022, investor interest has naturally turned toward ways of mitigating portfolio losses. Some factor indices can serve this goal, but investors searching for a defensive strategy need to define their search carefully. It’s natural to think that defensive strategies will be less volatile than the market…

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Aug 30, 2022

Defense in the Balance

Balanced portfolios traditionally (and definitionally) hold a mix of stocks and bonds. Stocks have been the better-performing asset over time, but with a level of volatility that many investors find unacceptably high. Although bonds are usually included in a balanced portfolio more as a volatility dampener than a return enhancer, during the bull market in…

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Feb 2, 2022

Is Fixed Income Failing? It May Be Time to Look at the Index

Last year wasn’t the best time to hold bonds. Nearly every equity market delivered solid gains in 2021, while the S&P U.S. Aggregate Bond Index fell 1.4%. Nevertheless, flows into fixed income products such as ETFs were firmly positive. The leading asset gatherer was total market-type ETFs, with one in every three dollars newly invested…

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Mar 1, 2021

Understanding SOFR

In June 2023, the U.S. dollar London Inter-Bank Offered Rate (LIBOR) will likely be discontinued. The Alternative Reference Rates Committee has identified the Secured Overnight Funding Rate (SOFR) as the recommended alternative reference rate to replace USD LIBOR. SOFR is calculated as a volume-weighted median of transaction-level U.S. Treasury repurchase agreements data, reflecting borrowing cost…

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Feb 16, 2021

Preferred Stock and Senior Loan Solutions for Yield-Starved Investors

So far in 2021, the fixed income market certainly hasn’t been very fixed—instead posting negative returns—nor has it offered much income, with yields of just over 1%. U.S. equity and bond indices both posted strong performance in 2020, driving up asset class correlations and dropping yields to new lows. So, when the 10-year U.S. Treasury…

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Nov 13, 2020

The Fed’s Corporate Bond Purchases and Their Impact on Corporate Bond Issuance

In response to COVID-19 and its disruptive impact on the credit market, the U.S. Federal Reserve announced the creation of the Primary Market Corporate Credit Facility (PMCCF) and the Secondary Market Corporate Credit Facility (SMCCF) on March 23, 2020, to support the functioning of the credit market. The PMCCF provides a funding backstop for corporate…

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Jul 22, 2020

Active Managers’ Outperformance in Brazilian Bond Funds – Skill or Price Distortion?

There were impressive results for active managers in the Brazil Corporate Bond Funds category, with 93.6% of them beating the benchmark in March 2020 and 88.2% Q1 2020. However, were these performance results due to true skill? This outperformance may be related to a market distortion. On the one hand, Brazil’s corporate bond funds experienced…

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