Commentary

High Yield Bond Investors Look Down from the Tightrope: Q3 2020 Portfolio Managers’ Quarterly

The tightrope walker has his blindfold off, the wind is blowing, and it’s a long way down. Technically speaking, high-yield bond prices broke downward through a “double bottom,” which could reasonably be taken as an indicator of coming trouble for the stock market as well, given the greater wariness among bond market investors this year.

Commentary

From Straight Up to Sideways to "Time to Play Defense" - Q2 2020 Portfolio Managers' Quarterly

Zero yields could remove much or all of the "hedging value" of Treasuries in traditional bond allocations. Yet another concern for "traditional" bond allocations is less diversification potential (given compressed yields) going into a potential flight to quality. We believe a tactical approach—with a firm willingness to shift to defense...

Commentary

Why We Shifted to Defense in Late February – Q1 2020 Portfolio Managers’ Quarterly

In late February, our Bond Asset Allocation/Tactical Fixed Income model prompted us to sell out of high yield bonds and instead take up a defensive position. It isn’t enough to simply analyze creditworthiness of issuers or movements in credit spreads. Anyone who thought they were taking a “tactical” approach without a broader analysis was likely sorely disappointed as the latter half of the quarter unfolded.

Commentary

Clearer Intermediate-Term Trend Signals About High Yield Bond Market

Since the high yield bond market lows in mid-November, prices recovered and have now moved somewhat above the late-October highs. This process has been slow—and we remained suspect that an intermediate-term trend had not been established.

Commentary

Understanding the High Yield Bond Market as Inflation Begins to Take Hold

Inflation may be starting to develop in the U.S., which has significant implications for the High Yield bond market. As inflation takes hold, the Fed’s normal response is to raise policy interest rates to prevent inflation from spiking higher. So what does a period of rising rates mean for High Yield bonds?

Commentary

High Yield Improvement Trend Appears Entrenched

The most important indicators for high-yield bond prices are the sector’s own price trends. At present, technical indicators strongly suggest a continuation of the high-yield bond strength that began in mid-February as the flight-to-quality urge faded. In addition to technical price trends, several backdrop indicators also suggest a favorable outlook for high-yield bonds, including GDP, oil, and the dollar.
Commentary

Should Investors Worry About China Selling U.S. Bonds?

At BTS we often say investors should increase the level of attention they pay to the price side of bonds, because we believe the risk of principal loss, especially in a low?interest rate environment, is higher than many people realize. It’s important to focus on supply and demand factors as part of that focus on bond prices.
Commentary

Rate Hikes: Investor Risk Perceptions and Historical Context

During a recent quarterly webcast for financial advisors, we asked the audience about their clients’ biggest concerns for the remainder of 2015. The four options were: - Losing money on their equity allocations; - Not earning enough income; - Not keeping up with the stock market; - Losing money on their fixed income allocations. Of these, “losing money on their equity allocations” was by far the most popular response, at just under 40%. In our view, bond market risks are greater than many people realize.
Commentary

Stay the Course or Take an Unconstrained Approach to Bonds

BTS Asset Management contends that todays bond market environment calls for an unconstrained approach to bonds with the ability to move between bond asset classes based on economic indicators and market opportunities. The potential discrepancy in results among bond asset classes may be more pronounced than we have seen in the past 30 years which creates opportunity for a more tactical approach. Now may be the time for an unconstrained approach to the bond market.
Commentary

High Yield Bond Outlook: A Time for Unconstrained Management

Using our unconstrained approach, BTS indicators signaled a move back into High Yield bonds near the end of September.BTS Asset Management views the High Yield bond sector as exhibiting solid fundamentals. Based on historical comparisons, High Yields have strong cash flow coverage for interest payments, due to conservative use of leverage. Post 2008, companies hired less people and have kept other fixed costs down.
Commentary

High Yield Bond Market Mid-Year Check In

After a prosperous 30-year bull market, the prospect for the future direction of High Yield bonds would seem to hinge on not whether, but when their decline starts.Dan Fuss has been managing bonds for 55 years. His multi-sector bond fund, Loomis Sayles Bond Fund, ranks in the top 10% of its peer group over the last 15- and 10- year periods as of December 31, 2012. Fuss believes that bonds are currently the most overbought market I have ever seen in my life in the business.