International Inflation Protected Bonds: Double Hedge in Uncertain Times
01/04/2011 0 comments
Bond markets have been in a slump. Various bond ETFs stabilized a bit in the past quiet week. By examining the following trend score table for bond ETFs that represent various fixed income subclasses, one can gain some insights into the current fixed income world:
- The once considered safe bonds, such as municipal (MUB, CMF, NYF), mortgage back securities (MBB) and intermediate Treasury bonds (IEF) have been in a down trend.
- In the risky end, high yield bonds and emerging market bonds are doing relatively well. However, it should be pointed out that emerging market bonds (PCY, EMB) had big drop in the past month, mostly due to the concern of inflation pressure in countries in emerging markets.
- U.S. inflation protected Treasury bonds (TIP) suffered from the same fate in the last two months, though they are still in the positive trend territory.
- International inflation protected bonds (WIP) gained top spot among the diverse array of bond asset classes.
For more detailed total return performance, please see here.
| Assets Class | Symbols | 12/31
Trend Score | 12/24
Trend Score | Direction |
|---|---|---|---|---|
| International Inflation Protected | WIP | 4.74% | 3.37% | ^ |
| High Yield | JNK | 4.6% | 4.85% | v |
| International Treasury | BWX | 2.93% | 0.99% | ^ |
| Emerging Mkt Bonds | PCY | 1.6% | 1.81% | v |
| Long Term Credit | LQD | 1.38% | 1.46% | v |
| Inflation Protected | TIP | 1.16% | 0.65% | ^ |
| Intermediate Term Credit | CIU | 0.93% | 0.72% | ^ |
| Short Term Credit | CSJ | 0.52% | 0.36% | ^ |
| Short Term Treasury | SHY | 0.38% | 0.17% | ^ |
| Intermediate Treasury | IEF | 0.19% | -0.21% | ^ |
| Treasury Bills | SHV | 0.05% | 0.01% | ^ |
| US Total Bond | BND | -0.07% | 0.18% | v |
| 10-20Year Treasury | TLH | -0.36% | -1.0% | ^ |
| MBS Bond | MBB | -0.66% | -1.29% | ^ |
| 20+ Year Treasury | TLT | -1.34% | -1.93% | ^ |
| National Muni | MUB | -2.8% | -2.78% | v |
| New York Muni | NYF | -3.66% | -2.97% | v |
| California Muni | CMF | -5.57% | -4.03% | v |
We make an educated guess that, given the uncertainty in fixed income markets: U.S. dollar being under (long term) pressure, ongoing inflation in emerging markets and possibly world wide (dollar denominated), international inflation protected bonds hold the best hedge at the moment.
labels:investment,
Symbols:AGG,BND,BWX,CIU,CMF,CSJ,EMB,HYG,IEF,JNK,LQD,MBB,MUB,NYF,PCY,PHB,SHV,SHY,TIP,TLH,TLT,WIP,
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