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  • Credit Market Trends: Upbeat Data Adds to Pressure on Treasuries

    12/14/2010

    Fixed income indices provide important insight into debt market conditions that are key to asset allocation strategies such as our Tactical Asset Allocation. MyPlanIQ uses representative ETFs and tracks detailed weekly bond trend movements. For detailed information, please visit MyPlanIQ 360 Degree Market View.

    As the economic outlook continues to improve with better-than-expected U.S. trade and consumer-sentiment reports, Treasuries sank in the week ended on 12/10. The brighter economic outlook has prompted investors to seek higher returns in riskier assets.

    The 10-year note's yield surged more than 0.30% last week, driving down prices of the 10-20 Year Treasury Bond Fund (TLH). The rising yields also pushed up long-term borrowing costs for consumers and businesses. As a result, national mortgage rates moved higher last week. The MBS Bond Fund (MBB) registered a weekly drop of 0.66%. With a struggling housing market, higher mortgage rates pose a threat to the recovery of the housing sector and the broader economy. If high interest rates persist in the weeks ahead, we expect to see a further drop in (MBB).

    Lower Treasury bond prices and higher yields were also putting pressure on the high yield bonds (JNK). High yield investors need to remain cautious and pay particular attention on the rate at which the Treasury benchmark rises - the pace of increase in the junk bond yield spreads over Treasuries might eventually catch up with that of the rising benchmark, further putting pressure on the prices of junk bonds.

    Yields on munis (MUB) also rose along with Treasuries as investors grappled with the ramifications of the likely end of the government-subsidized Build America Bond Program. As more states and cities rush to tap the tax-exempt debt market to raise funds before year-end, investors are concerned that, as a result of incremental supply, there will be a sell-off. Uncertainties around the extension of this popular program has triggered a great deal of volatility in the market and will remain to be the case until after the passage of the tax bill.

    Assets Class

    Symbols

    12/10

    Trend

    Score

    12/03

    Trend

    Score

    Direction

    High Yield

    (JNK)

    4.33%

    4.81%

    v

    Emerging Mkt Bonds

    (PCY)

    2.82%

    3.14%

    v

    International Inflation Protected

    (WIP)

    2.12%

    2.65%

    v

    Long Term Credit

    (LQD)

    0.83%

    1.3%

    v

    International Treasury

    (BWX)

    0.54%

    0.98%

    v

    Short Term Credit

    (CSJ)

    0.53%

    0.85%

    v

    Intermediate Term Credit

    (CIU)

    0.43%

    1.37%

    v

    Short Term Treasury

    (SHY)

    0.21%

    0.46%

    v

    Treasury Bills

    (SHV)

    0.03%

    0.03%

    v

    US Total Bond

    (BND)

    -0.19%

    0.59%

    v

    Inflation Protected

    (TIP)

    -0.3%

    1.32%

    v

    Intermediate Treasury

    (IEF)

    -0.73%

    1.03%

    v

    10-20Year Treasury

    (TLH)

    -1.28%

    0.2%

    v

    MBS Bond

    (MBB)

    -1.71%

    -1.8%

    ^

    20+ Year Treasury

    (TLT)

    -2.28%

    -1.93%

    v

    New York Muni

    (NYF)

    2.91%

    -1.45%

    v

    National Muni

    (MUB)

    -3.5%

    -1.81%

    v

    California Muni

    (CMF)

    -3.93%

    -1.83%

    v

    click to enlarge images

    Top Three indicators

    Bottom Three Indicators

    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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  • U.S. Stocks Strong; Other Bond Markets Continue to Slump

    12/13/2010

    Last week, we continued to observe major weakness in fixed income markets. From our Market View, one can see that most bond ETFs underwent 1-2% loss. Municipal bonds and intermediate term treasuries were the biggest losers. Municipal bonds were avoided due to the concerns on the dire financial situations of state and local governments, let alone the extreme low yields to begin with. Investors were also worried about longer term bonds, including treasuries and corporate bonds based on inflation outlook.

    Based on the major asset price trends in the following table, other noticeable developments include:

    1. US Stocks were very strong, now placed in the third spot among all other major asset classes.
    2. US REITs continued their weakness, losing 1.3% last week and were out of top five spots.
    3. all fixed income asset classes were at the bottom of the ranking: the lower the perceived risks based on conventional wisdom, the lower their rankings were.
    4. Broad base commodities were relatively intact while gold continued its correction.
    Assets Class Symbols 12/10
    Trend
    Score
    12/03
    Trend
    Score
    Direction
    Frontier Market Stks (FRN) 13.93% 13.33% ^
    International REITs (RWX) 10.35% 10.73% v
    US Stocks (VTI) 10.21% 9.57% ^
    Emerging Market Stks (VWO) 9.64% 11.67% v
    Gold (GLD) 9.46% 11.1% v
    Commodities (GSG) 8.74% 10.22% v
    US Equity REITs (VNQ) 7.67% 9.21% v
    International Developed Stks (EFA) 6.51% 6.94% v
    US High Yield Bonds (JNK) 4.33% 4.81% v
    Emerging Mkt Bonds (PCY) 2.82% 3.14% v
    US Credit Bonds (CFT) 0.72% 0.94% v
    International Treasury Bonds (BWX) 0.54% 0.98% v
    Treasury Bills (SHV) 0.03% 0.03% v
    Total US Bonds (BND) -0.19% 0.59% v
    Intermediate Treasuries (IEF) -0.73% 1.03% v
    Mortgage Back Bonds (MBB) -1.71% -1.8% ^
    Municipal Bonds (MUB) -3.5% -1.81% v

    The takeaway is that investors continued their strong risk appetite. Among risk assets, US stocks stood out as worries in European debt markets and inflation pressure in emerging markets dampened demands on those assets.

     

    labels:investment,

    Symbols:AGG,BND,BWX,CFT,DBA,DBC,EEM,EFA,EMB,FRN,GLD,GSG,HYG,ICF,IEF,IWM,IYR,JNK,MBB,MDY,MUB,PCY,PHB,QQQQ,RWX,SHV,SLV,SPY,TLT,VEU,VNQ,VTI,VWO,

     

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  • Credit Market ETF Trends: Optimism as European Debt Concerns Fade

    12/07/2010

    Fixed income indices provide important insight into debt market conditions that are key to asset allocation strategies such as our Tactical Asset Allocation. MyPlanIQ uses representative ETFs and tracks detailed weekly bond trend movements. For detailed information, please visit MyPlanIQ 360 Degree Market View.

    Government debt with medium to long-term maturities (TLH, TLT) fell in the week ended on 12/3 as the Federal Reserve said the economy strengthened in 10 of its 12 regions with improved hiring, expanded manufacturing figures, and stronger holiday shopping anticipated by retailers. A higher-than-expected unemployment rate and a smaller-than-forecast gain in November payrolls, however, pushed yields on the T-bills (SHV) lower.

    Assets Class

    Symbols

    12/03
    Trend
    Score

    11/26
    Trend
    Score

    Direction

    High Yield

    JNK

    4.81%

    4.05%

    ^

    Emerging Mkt Bonds

    PCY

    3.14%

    3.45%

    v

    International Inflation Protected

    WIP

    2.65%

    1.17%

    ^

    Intermediate Term Credit

    CIU

    1.37%

    2.16%

    v

    Inflation Protected

    TIP

    1.32%

    2.05%

    v

    Long Term Credit

    LQD

    1.3%

    2.5%

    v

    Intermediate Treasury

    IEF

    1.03%

    2.34%

    v

    International Treasury

    BWX

    0.97%

    -0.15%

    ^

    Short Term Credit

    CSJ

    0.85%

    1.0%

    v

    US Total Bond

    BND

    0.59%

    1.05%

    v

    Short Term Treasury

    SHY

    0.46%

    0.46%

    v

    10-20Year Treasury

    TLH

    0.2%

    1.46%

    v

    Treasury Bills

    SHV

    0.03%

    0.02%

    ^

    New York Muni

    NYF

    -1.45%

    -0.73%

    v

    MBS Bond

    MBB

    -1.8%

    1.55%

    v

    National Muni

    MUB

    -1.81%

    -1.1%

    v

    California Muni

    CMF

    -1.83%

    -1.24%

    v

    20+ Year Treasury

    TLT

    -1.93%

    -0.54%

    v

    Top Three Indicators

    click to enlarge


    Despite the disappointing unemployment data on Friday, the high-yield bonds (JNK) held up well. Both new-bond issuance and secondary market tone rebounded as concerns stemming from European sovereign debt crisis eased. Investors are gaining confidence that Europe’s debt crisis won’t infect the global economy. Risks remain and investors should remain cautious, however, as cash flow of corporate issuers could fall short with the weak economic recovery, and bonds could come due at the wrong time.

    With a struggling labor market, investors are betting that it will help contain inflation. The yields on U.S. Treasury Inflation Protected Securities (TIP) rose and the price registered a weekly loss of 1.2%.On the other hand the inflation report abroad paints a very different picture, with countries like China reaching a 20% food-price inflation in a month and its government rolling out tightening monetary and fiscal policies to curb inflation. The International Inflation Protected (WIP) rose almost 3% last week.

    Bottom Three Indicators

    Long term treasuries (TLT) fell further as better economic data and easing concerns over euro debt contagion have prompted investors to move away from the safe-haven assets and into risky assets. The Federal Reserve’s $600 billion government bond purchase program had little effect on the long-dated treasuries as the bond-buying program focuses on bonds maturing in three to four years.

    The muni market remains fragile with National Muni (MUB) and California Muni (CMF) registering the lowest trend scores in our table. The muni market has been flooded with new issues. States such as California rushed to the taxable market for frantic rounds of fundraising before the federally subsidized Build America Bonds Program runs out at year end. As the extension of this program remains uncertain, we expect to see more states and cities tapping the taxable markets in the next couple of weeks.

     

    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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  • Major Asset Trends: Emerging Market Stocks Had a Bigger Drop while U.S. REIT Held Up Well

    11/30/2010

    Asset trends provide insights into underlying economic and market segments and are critical to tactical asset allocation strategies. We use ETFs that represent the asset class indices.

    Last week, as the European debt situation started to unfold, risk assets continued their downtrend while fixed income recovered somewhat (especially in safer bonds such as investment grade credit bonds), reflecting a reduced risk appetite. It is another watchful week. Given the uncertainty in world economics, investors should be in a heightened alert state on the markets.

    Assets Class

    Symbols

    11/26
    Trend
    Score

    11/19
    Trend
    Score

    Direction

    Frontier Market Stks

    (FRN)

    14.18%

    16.78%

    v

    US Equity REITs

    (VNQ)

    10.71%

    8.76%

    ^

    Emerging Market Stks

    (VWO)

    7.85%

    11.59%

    v

    Gold

    (GLD)

    7.74%

    8.55%

    v

    US Stocks

    (VTI)

    7.64%

    8.28%

    v

    International REITs

    (RWX)

    7.15%

    9.99%

    v

    Commodities

    (GSG)

    4.61%

    3.12%

    ^

    US High Yield Bonds

    (JNK)

    4.05%

    6.13%

    v

    International Developed Stks

    (EFA)

    3.67%

    8.08%

    v

    Emerging Mkt Bonds

    (PCY)

    3.45%

    3.64%

    v

    Intermediate Treasuries

    (IEF)

    2.34%

    2.15%

    ^

    US Credit Bonds

    (CFT)

    2.06%

    1.97%

    ^

    Mortgage Back Bonds

    (MBB)

    1.55%

    1.57%

    v

    Total US Bonds

    (BND)

    1.05%

    1.04%

    ^

    Treasury Bills

    (SHV)

    0.02%

    0.03%

    v

    International Treasury Bonds

    (BWX)

    -0.15%

    2.01%

    v

    Municipal Bonds

    (MUB)

    -1.1%

    -1.68%

    ^

    click to enlarge

    The riskiest asset, frontier market stocks, remains in the top spot while emerging market stocks had a much bigger drop than the U.S REITs.

    Inflation in China, the Korean peninsula tension and the Irish debt problem were some major reasons behind the drops of emerging market stocks and international developed stocks.

    Municipal bonds recovered a bit while international treasury bonds had another decrease mostly due to the debt situation and dollar's strength. Treasury bills remained unchanged, which is expected. Emerging market bonds had a little drop, but are still pointing to an up trend.

    In conclusion, the market continued its gyrations, trying to figure out the next trend. It might or might not be a trend turning point. Since the world economics is not out of the woods yet, it pays to keep monitoring events closely.

     

    labels:investment,

    Symbols:AGG,BND,BWX,CFT,DBA,DBC,EEM,EFA,EMB,FRN,GLD,GSG,HYG,ICF,IEF,IWM,IYR,JNK,MBB,MUB,PCY,PHB,RWX,SHV,SPY,TLT,VEU,VNQ,VTI,VWO,

     

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  • Fixed Income Trends: Credit Markets Largely Stabilized

    11/30/2010

    Fixed income indices provide important insight into debt market conditions that are key to asset allocation strategies. MyPlanIQ tracks detailed weekly bond trend movement. We use ETFs that represent the bond classes.

    Last week we noted that practically all bond assets other than high yield and treasuries had dropped dramatically. This week, we have seen some modest gains in short/medium maturity bonds and Munis. This indicates that terrifying state finances have produced an overdone sell off in municipal bonds.

    Assets Class

    Symbols

    11/26
    Trend
    Score

    11/19
    Trend
    Score

    Direction

    High Yield

    JNK

    4.05%

    6.13%

    v

    Emerging Mkt Bonds

    PCY

    3.45%

    3.64%

    v

    Long Term Credit

    LQD

    2.5%

    2.55%

    v

    Intermediate Treasury

    IEF

    2.34%

    2.15%

    ^

    Intermediate Term Credit

    CIU

    2.16%

    2.1%

    ^

    Inflation Protected

    TIP

    2.05%

    1.96%

    ^

    MBS Bond

    MBB

    1.55%

    1.57%

    v

    10-20Year Treasury

    TLH

    1.46%

    1.18%

    ^

    International Inflation Protected

    WIP

    1.17%

    3.93%

    v

    US Total Bond

    BND

    1.05%

    1.04%

    ^

    Short Term Credit

    CSJ

    1.0%

    1.09%

    v

    Short Term Treasury

    SHY

    0.46%

    0.44%

    ^

    Treasury Bills

    SHV

    0.02%

    0.03%

    v

    International Treasury

    BWX

    -0.15%

    2.01%

    v

    20+ Year Treasury

    TLT

    -0.54%

    -1.29%

    ^

    New York Muni

    NYF

    -0.73%

    -2.31%

    ^

    National Muni

    MUB

    -1.1%

    -1.68%

    ^

    California Muni

    CMF

    -1.24%

    -2.86%

    ^

    Top Three Indicators

    Click to enlarge

    The spreads on speculative-grade bonds widened as investors still lacked confidence on whether Ireland’s fiscal crisis will be contained. At the same time in the U.S., data on jobless claims and manufacturing bolstered optimism the world’s biggest economy won’t slide back into recession, causing borrowers to default on the debt.

    Factories in the Philadelphia region also expanded at the fastest pace of the year, and the number of workers seeking jobless benefits over the past four weeks fell to the lowest level in two years. The economic data appears to be in a strengthening mode and it is difficult to see a major sell-off of high yields gaining momentum.

    Bottom Three Indicators

    Click to enlarge

    The Munis markets reversed their recent downward trend and have stabilized. One of the biggest worries for muni bond investors has been state and local budgets that have gotten out of hand all over the U.S. Although large-scale muni defaults are rare and they are usually resolved by investors getting late payments, there’s no ignoring the fact that states such as California and New York are in financial trouble and need to quickly find a way to balance their budget and get through the current period.

     

    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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