Disinflation Hopes Reshape Treasury Yields' Major Trend: 5 Bond ETFs Poised To Rally On Fed Rate Cuts
Portfolio Pulse from Piero Cingari
The bond market is experiencing a major trend shift as key Treasury yields test the 200-day moving average support, driven by benign economic data and expectations of Federal Reserve rate cuts. Five bond ETFs, including TLT, BND, LQD, JNK, and EMB, are poised to benefit from this trend.
May 16, 2024 | 5:55 pm
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POSITIVE IMPACT
Vanguard Total Bond Market Index Fund ETF (BND) offers a diversified mix of bonds and is expected to benefit from the shift in market sentiment towards lower interest rates. BND rose 0.6% following the latest inflation data.
BND's diversified bond portfolio makes it a stable choice in a shifting market environment, benefiting from lower interest rates.
CONFIDENCE 90
IMPORTANCE 80
RELEVANCE 80
POSITIVE IMPACT
iShares J.P. Morgan USD Emerging Market Bond ETF (EMB) could benefit from retreating Treasury yields and a slower pace of Fed rate hikes. EMB rose 1.1% in reaction to recent inflation data.
EMB offers exposure to emerging market bonds, which could benefit from lower Treasury yields and a slower pace of Fed rate hikes.
CONFIDENCE 85
IMPORTANCE 75
RELEVANCE 70
POSITIVE IMPACT
SPDR Bloomberg High Yield Bond ETF (JNK) covers the high-yield bond market and could benefit from rate cuts as investors seek higher yields. High-yield bonds often perform well in a lower interest rate environment.
JNK covers high-yield bonds, which are attractive to investors in a lower interest rate environment, potentially leading to price increases.
CONFIDENCE 80
IMPORTANCE 70
RELEVANCE 60
POSITIVE IMPACT
iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) is expected to see price increases as rate cut expectations strengthen. Investment-grade corporate bonds could benefit from a more favorable interest rate environment.
LQD offers exposure to investment-grade corporate bonds, which are likely to benefit from a favorable interest rate environment.
CONFIDENCE 85
IMPORTANCE 75
RELEVANCE 70
POSITIVE IMPACT
iShares 20+ Year Treasury Bond ETF (TLT) is expected to benefit from falling long-term Treasury yields, which move inversely to bond prices. TLT rose 1.4% following the latest inflation data.
TLT is highly sensitive to changes in long-term interest rates. As yields fall, bond prices rise, making TLT a strong candidate for gains.
CONFIDENCE 95
IMPORTANCE 90
RELEVANCE 100