CMG AdvisorCentral

Tactical investing news, views and resources for financial advisors

Blumenthal On Bonds

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1977 Treasury BondBy Steve Blumenthal, CIO
CMG Capital Management Group

Trend following process moved us from HY
to very short-term bond exposure last week

For more than 22 years I’ve been trading the intermediate-term trends in the high yield market. I wake up each day, grab a coffee and sit in my favorite chair. With laptop online, the first thing I do is look at the prior day’s high yield bond mutual funds’ closing prices – it’s a pretty long list. Do anything for that long a period of time and you gain a feel for trend. Of course, my wife looks over and says, “Looking at charts again.” It has remained so interesting to me. I know – I need to get a life.

Anyway, I’ve been warning on the coming default wave in high yield and I can say with some confidence that high yield is usually one of the first asset classes to warn of recession. Though, of course, past performance means zilcho in this business.

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Blumenthal in Bloomberg on Bond Trends

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bloomberg-logoCMG Capital Management Group CEO Steve Blumenthal spoke to Bloomberg News about about trends in the bond market.  The story by By Sridhar Natarajan and Matt Robinson, Junk Bonds Overtaken by High Grade as 2014’s Favored Bet, begins:

Bonds sold by investment-grade companies worldwide are on pace to deliver something they’ve managed only twice in the past 17 years: annual returns of at least 10 percent.

The debt has become a sweet spot for investors who see little threat of rising interest rates while avoiding the rush into higher-yielding junk bonds that last month handed buyers their biggest losses in a year. High-grade securities, on pace for an eighth straight monthly gain, have returned 6.5 percent since the end of 2013, according to the Bank of America Merrill Lynch Global Corporate Index.

The article hits on Yellen’s recent backing of investment-grade bonds, the duration of junk vs. high grade bonds and the high withdrawal levels in junk bonds this year.

‘Ultimately,’ CMG CEO Blumenthal says, ‘The question is if the Fed is going to suppress rates longer than anyone expected. Yellen is broadcasting that things are weaker than what everybody might think and that means rates are likely to remain suppressed.'”