S&P 500 FINANCIALS INDEX
| Value 189.07 | Change 3.97 | % Change 2.1% |
The Alerian MLP Index is back up 1+ to the 240s & the Dow Jones REIT Index is up 3+ to the 158s.
Alerian MLP Index --- 2 weeks
Dow Jones REIT Index --- 2 weeks
I returned from a meeting with a prominent junk bond fund manager. They are grateful for the strong recovery by junk bonds this year. At the start of this year yields were around 20-25% with yield spreads over the 10 year Treasury bond of over 2000%. With its spectacular rise this year, yields have plunged to around 12% with a yield spread of 800 basis points over the Treasury bond. They are optimistic about the future of junk bonds, that's their job. The key factor is the default rate, while high, has not reached astronomical proportions feared earlier this year. Everybody agrees that more defaults are ahead but with management allocating investments to stronger sectors, damage may be limited. My worry is about rising Treasury bond rates which could bleed thru to high risk bonds, but they view these investments as being significantly different. Below is a chart for the leading junk bond fund ETF showing the rebound this year. Being an index fund, it understates the records of many individual funds.
Barclays Capital Hi Yld Bond ETF - YTD
Oil is participating in the rally, taking it above the important 70 level.
| CLU09.NYM | ...Crude Oil Sep 09 | ...70.59 | ... 1.14 .......(1.64%) |
Today may be an example of, "Buy on the rumor & sell on the news." There is not much the FED can do with interest rates, but any announcement about their view of the economy & what they plan to do going forward is eagerly awaited. The yield on the Treasury bond is little changed ahead of its auction of additional bonds in a couple of hours.
Dow Jones Industrials --- 2 weeks
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