Profile image
By ETF Daily News (Reporter)
Contributor profile | More stories
Story Views

Now:
Last Hour:
Last 24 Hours:
Total:

Investors Are Very Worried About a Bond Market Crash

Tuesday, October 18, 2016 8:57
% of readers think this story is Fact. Add your two cents.

(Before It's News)

"http://etfdailynews.com/wp-content/uploads/2012/05/bonds-600X300.png"
target="_blank"> "http://etfdailynews.com/wp-content/uploads/2012/05/bonds-600X300-300x150.png"
alt="bonds 600X300" width="300" height="150" srcset=
"http://etfdailynews.com/wp-content/uploads/2012/05/bonds-600X300-300x150.png 300w, http://etfdailynews.com/wp-content/uploads/2012/05/bonds-600X300.png 600w"
sizes="(max-width: 300px) 100vw, 300px" />
According to the
latest research from analysts at Bank of America Merrill Lynch,
investors are increasingly worried about a massive bond market
pullback.

The firm recently surveyed a number of fund managers, and bond
market fears clearly rose to the top of the list. As you can see
below, only the “EU disintegration” beat out “Crash in bond
market/rising credit spreads” in terms of what money managers feel
is the biggest “tail risk”:

"http://etfdailynews.com/wp-content/uploads/2016/10/bofa-ml-tlt.png"
target="_blank"> "http://etfdailynews.com/wp-content/uploads/2016/10/bofa-ml-tlt.png"
alt="bofa-ml-tlt" width="500" />
Image: Bank of
America/Merrill Lynch

Despite record low yields, investors have still flocked to
government bonds over the last several years because they simply
didn’t have many other “safe” choices. This trend, in turn, has
driven what many believe is a huge bond market bubble. Still, many
managers believe that the yield curve will steepen soon:

"http://etfdailynews.com/wp-content/uploads/2016/10/bofa-ml-tlt2.png"
target="_blank"> "http://etfdailynews.com/wp-content/uploads/2016/10/bofa-ml-tlt2.png"
alt="bofa-ml-tlt3" width="500" />

A steepening yield curve means that the spread between short-
and long-term bond yields is increasing. For that to happen, either
long-term yields have to rise at a faster rate, or short-term bond
yields have to fall at a faster rate. Those scenarios typically
happen during periods of economic expansion and rising inflation,
although no one really knows, given how deeply involved central
banks are in the bond markets these days.

A final important finding from the survey involves the relative
positioning of bond allocation versus cash. As you can see below,
this ratio is at its lowest point in over ten years:

"http://etfdailynews.com/wp-content/uploads/2016/10/bofa-ml-tlt3.png"
target="_blank"> "http://etfdailynews.com/wp-content/uploads/2016/10/bofa-ml-tlt3.png"
alt="bofa-ml-tlt3" width="500" />

What do these results mean for the bond markets? The world’s
largest asset manager, BlackRock, recently wrote that "nofollow" href=
"http://etfdailynews.com/2016/10/14/blackrock-get-prepared-for-december-rate-hike/"
target="_blank">investors should prepare for a December rate
hike
. That would mean that long-term bonds present a big risk
right now, so investors should watch them very carefully.

The SPDR Lehman Long Term Treasury ETF ( "http://etfdailynews.com/etf/TLO/" target=
"_blank">NYSE:TLO
) rose $0.08 (+0.10%) to
$76.37 per share in Tuesday morning trading. Year-to-date, the TLO,
which holds bonds with durations of ten years or longer, has gained
9.29%.

"http://etfdailynews.com/wp-content/uploads/2016/10/TLO-2016-10-18.png"
target="_blank"> "http://etfdailynews.com/wp-content/uploads/2016/10/TLO-2016-10-18.png"
alt="TLO-2016-10-18" width="500" />

Meanwhile, the iShares Barclays 20+ Yr Treasury Bond ETF
( "_blank">NASDAQ:TLT) rose $0.14 (+0.11%) to
$132.57 per share in Tuesday trading. Year-to-date, the TLT, which
invests in bonds with durations of 20 years or more, has gained
9.95%.

"http://etfdailynews.com/wp-content/uploads/2016/10/TLT-2016-10-18.png"
target="_blank"> "http://etfdailynews.com/wp-content/uploads/2016/10/TLT-2016-10-18.png"
alt="TLT-2016-10-18" width="500" srcset=
"http://etfdailynews.com/wp-content/uploads/2016/10/TLT-2016-10-18.png 700w, http://etfdailynews.com/wp-content/uploads/2016/10/TLT-2016-10-18-300x134.png 300w, http://etfdailynews.com/wp-content/uploads/2016/10/TLT-2016-10-18-250x111.png 250w, http://etfdailynews.com/wp-content/uploads/2016/10/TLT-2016-10-18-600x267.png 600w"
sizes="(max-width: 700px) 100vw, 700px" />

Investors looking for more options in the bond space — including
shorter-term bonds that should perform better in a rising rate
environment, should consult our "http://etfdailynews.com/etfs/government-bonds-etfs/" target=
"_blank">List of Government Bond ETFs
.

You are viewing an abbreviated republication of ETF Daily
News content. You can find full ETF Daily News articles on
(www.etfdailynews.com)
"adsonar_map_1524846_26405223">
"http://newsletter.adsonar.com/nwrss/iMapRedirector?placementId=1524846&plid=346054&pid=2205768&ps=26405223&rotation=4&type=2&pos=0&zw=468&zh=60&v=5&url=NA&uid=" />
"http://investingchannel.sl.advertising.com/admin/advertisers/indexPl.jsp" />

"http://newsletter.adsonar.com/nwrss/imgs/nwr_1524846_26405223_346054_2205768_4_2.PNG?placementId=1524846&plid=346054&pid=2205768&ps=26405223&rotation=4&type=2&zw=468&zh=60&v=5&url=NA&uid="
width="468" height="60" alt="" usemap=
"#adsonar_map_1524846_26405223" />



Source: http://etfdailynews.com/2016/10/18/investors-are-very-worried-about-a-bond-market-crash/

Report abuse

Comments

Your Comments
Question   Razz  Sad   Evil  Exclaim  Smile  Redface  Biggrin  Surprised  Eek   Confused   Cool  LOL   Mad   Twisted  Rolleyes   Wink  Idea  Arrow  Neutral  Cry   Mr. Green

Top Stories
Recent Stories
 

Featured

 

Top Global

 

Top Alternative

Register

Newsletter

Email this story
Email this story

If you really want to ban this commenter, please write down the reason:

If you really want to disable all recommended stories, click on OK button. After that, you will be redirect to your options page.