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Bond ETF Analysis Archive

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Bond ETF Analysis: 10 September 2014

Bond funds fail at recent highs to now form potential tops...

Market Overview

Bond prices have generally recovered since the beginning of the year, with government bond funds and emerging market funds making short term uptrends.

However, we now note an overall theme of momentum failure from these recent highs as bond funds across sectors now form potential short term tops.

Government bond funds such as the US 7-10 Years (IEF) and the US 20+ Years (TLT) now test their uptrends while corporate bond funds such as the US High Yield (HYG) and emerging market funds like the EM Local Bonds (ELD) now confirm their short term tops.

Outlook

Over the coming weeks, we anticipate that bond funds in general will continue to form short term tops, but watch as they approach key medium term support levels.

We anticipate that the current weakness in government bonds may be limited to the short term as uptrends remain largely in place.

We may, however, see further downside in corporate bond funds and emerging markets as they now test recent lows.

Trend Summary (sorted by trend score)

Government

Trend Score

 

Corporate

Trend Score

 

Emerging Markets

Trend Score

TLT

 US 20+yrs

47

 

IBCX

 Euro Corporate Bond

45

 

EMB

 EM Bonds in USD (EMB)

9

WIP

 Int. Inflation Protected

29

 

IEAG

 Euro Aggregate Bond

43

 

ELD

 EM Bonds (Local)

-71

SHY

 US 1-3yrs

9

 

PFF

 US Preferred Stock S&P

39

 

ALD

 EM Asia Local

-26

MUB

 US Muni Bond S&P

9

 

LQD

 US Investment Grade

37

 

PCY

 EM Sovereign Debt

39

IGLT

 UK Gilt All

9

 

IHYG

 Euro High Yield

17

 

 

 

 

IBGX

 Euro Govt 3-5

-8

 

JNK

 US High Yield BarCap

17

 

 

 

 

IEF

 US 7-10yrs

-28

 

HYG

 US High Yield

17

 

 

 

 

TIP

 US TIPS

-36

 

MBB

 US MBS Bond Fund

9

 

 

 

 

IBGS

 Euro Govt 1-3

-81

 

AGG

 US Aggregate Bond

-26

 

 

 

 

Bond ETF Highlights

Government

  • US 20+ Years (TLT)
  • US TIPS (TIP)
  • UK Gilt All (IGLT)

Corporate

  • US High Yield (HYG)
  • US Investment Grade (LQD)

Emerging Market

  • EM Bonds Local (ELD)
  • EM Asia Local (ALD)
 

Name

Last Price

Last Dividend

Last Div. Date

Div. Frequency

Est. Yield (%)

Government

         

SHY

 US 1-3yrs

84.46

0.028

08/09/2014

Monthly

0.40

IEF

 US 7-10yrs

103.55

0.181

08/09/2014

Monthly

2.10

TLT

 US 20+yrs

115.62

0.271

08/09/2014

Monthly

2.81

TIP

 US TIPS

113.65

0.194

08/09/2014

Monthly

2.05

MUB

 US Muni Bond S&P

109.37

0.252

08/09/2014

Monthly

2.77

WIP

 Int. Inflation Protected

60.49

0.108

10/09/2014

Monthly

2.15

IGLT

 UK Gilt All

11.72

0.119

07/05/2014

Semi-Annual

2.02

IBGS

 Euro Govt 1-3

114.89

0.604

10/09/2014

Semi-Annual

1.05

IBGX

 Euro Govt 3-5

133.19

1.116

07/05/2014

Semi-Annual

1.68

Corporate

         

LQD

 US Investment Grade

118.65

0.340

07/10/2014

Monthly

3.25

HYG

 US High Yield

92.96

0.430

07/10/2014

Monthly

5.27

JNK

 US High Yield BarCap

40.81

0.187

10/09/2014

Monthly

5.49

MBB

 US MBS Bond Fund

108.01

0.112

08/09/2014

Monthly

1.25

AGG

 US Aggregate Bond

109.17

0.195

08/09/2014

Monthly

2.14

PFF

 US Preferred Stock S&P

39.36

0.191

08/09/2014

Monthly

5.81

IEAG

 Euro Investment Grade

118.15

1.250

16/07/2014

Semi-Annual

2.12

IHYG

 Euro High Yield

108.21

2.685

10/09/2014

Semi-Annual

4.96

IBCX

 Euro Corporate Bond

133.59

0.699

10/09/2014

Quarterly

2.09

Emerging Markets

         

EMB

 EM Bonds (USD)

114.51

0.290

08/09/2014

Monthly

3.04

ELD

 EM Bonds (Local)

46.39

0.130

29/08/2014

Monthly

3.36

ALD

 EM Asia Local

49.20

0.040

29/08/2014

Monthly

0.98

PCY

 EM Sovereign Debt

29.17

0.107

29/08/2014

Monthly

4.41

Government

The US 20+ Years (TLT) ETF reasserted its short term uptrend having confirmed its break above the previous medium term resistance level at 110 (now support). However, it encountered further resistance at 119 and now exhibits momentum failure, testing its short term uptrend. On a confirmed break below immediate support at 114, we may see a further test of the breakout level at 110.

The US TIPS (TIP) ETF now tests support at the previous breakout level of 114, forming a potential short term price top. Further downside from here would likely entail a test of the medium term support level at 110.

Against the TLT, we find the TIP testing short term support (lower chart).

The UK Gilt All (IGLT) ETF also exhibits some momentum failure from recent highs but may now be finding uptrend support at 11.7. We anticipate an uptrend reassertion were support to hold, with upside potential extending towards the top of the short term range at 12.2.

We also find the IGLT forming a potential short term base above support against the TLT (lower chart).

Corporate

The US High Yield (HYG) ETF falls sharply from recent highs to develop a short term top formation below medium term resistance at 95.5. We anticipate a test of recent lows at 92 followed by a likely test of support at the bottom of the range at 92.

In its performance against the TLT (lower chart), we find that the HYG remains within a short term downtrend, indicating sustained underperformance to the benchmark.

The US Investment Grade (LQD) ETF also fails at recent highs following its attempted test of resistance at 120, but has yet to confirm a short term top. We note short term uptrend support at 118 and look for this level to hold, limiting the potential for further downside.

The LQD also finds support against the TLT which may also limit further downside. However, a break of both price and relative support levels will be cause for concern.

Emerging Markets

The Local EM Bonds (ELD) ETF reasserts its short term top formation following its short term uptrend since the beginning of the year. We now look for a test of short term support at 45.7, followed by a likely test of further support at 45.4.

Against the TLT, the ELD reasserts its short term downtrend, approaching the bottom of the medium term relative range.

The EM Asia Local (ALD) ETF extends its failure below key resistance at 50 and tests its short term uptrend. A break below short term support at 49 would confirm a short term top formation and likely lead to further downside towards the bottom of the range at 47.

We note the ALD reasserting its downtrend against the TLT, now testing medium term support.

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