Bond ETFs step up amid growth concerns
Exchange-traded bond funds strengthened on Thursday as stock markets pulled back amid concerns about the economic recovery and the delta variant of Covid-19 gaining traction.
“The markets are having a bad morning, but that’s normal and even healthy given the recent strong advance,” Brad McMillan, chief investment officer at Commonwealth Financial Network, told Reuters. “It sounds like a short-term reaction to recent concerns about the Delta variant more than anything else.”
Some market watchers are also increasingly concerned about labor shortages and supply chain bottlenecks that could hamper the pace of economic recovery.
“There is a bit of recognition that things don’t look as good economically as they were in mid-June when everything seemed to be reaching the happy medium of Goldilocks,” said Edward Park. , chief investment officer at Brooks Macdonald, on Wall Street. Newspaper. “The Delta, or the next Delta, will be a recurring risk in the markets.”
Global investors dismissed the risk and moved away from equities as bond prices rallied and benchmark 10-year T-bill yields dipped for a fourth day to around 1.25%.
“This drop in bond yields could signal that the inflation explosion is transient, and / or that the Delta variant will slow growth, although at 1.25% this morning that seems extreme,” Ed Hyman, founder and president of Evercore ISI and director of Evercore ISI. economic research, said in a note, according to CNBC.
Investors looking to strengthen their bond strategies may consider the Avantis Core Fixed Income ETF (AVIG), which invests in a wide range of debt securities across all industries, maturities and issuers. AVIG seeks the advantages associated with indexation, such as diversification and transparency of exposures. Yet the fund also has the ability to add value by making investment decisions using information embedded in current returns.
the Avantis Short Term Fixed Income ETF (AVSF) Also invests primarily in high quality debt securities of a diverse group of US and non-US issuers with shorter maturities.
In addition, active management American Century Diversified Corporate Bond ETF (NYSEArca: KORP) invests in US dollar denominated corporate debt securities issued by US and foreign entities, but may also hold securities issued by supranational entities. Up to 35% of the fund’s net assets may be invested in high yield securities or junk bonds. The fund may also invest in derivative instruments such as forward contracts and swap agreements. The weighted average portfolio duration of the fund is expected to be between three and seven years.
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