The Consistency of Fallen Angel High Yield Bond Returns
By William Sokol, Senior ETF Product Manager
After essentially completing a market cycle in just three quarters in 2020, high yield spreads are back below historical averages and yields are as low as they’ve ever been. High yield investors may be asking what might drive performance going forward, and how to navigate an environment characterized by both tight spreads and higher corporate leverage, as well as continued low rates in the face of higher economic growth. We believe that in this uncertain environment, high yield investors should be selective and focus on fallen angel bonds which are bonds originally issued with investment grade ratings as a potential source of outperformance relative to the broad high yield bond market. Fallen angels have provided outperformance in 13 of the last 17 calendar years, a level of consistency that we believe may be attractive in a changing market environment such as the one we are curre
Global copper prices chased after gains in China where the most-traded copper contract on the Shanghai Futures Exchange SCFcv1 rallied to as high as 63,290 yuan, or $9,784, up almost 6% and touching its highest since September 2011, Reuters reports.
Fueling the ongoing rally in the industrial metal, China, the biggest metals consumer, has seen a surge in demand on its rebounding economy. Additionally, there were increased expectations of tight supply and a rush of speculative investment, with many analysts jumping on the multi-year bull run.
However, Commerzbank warned that the metals market may be too frothy, arguing that commodities were “completely detached from reality.” MarketWatch reports.
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ETF of the Week: WisdomTree China ex-State-Owned Enterprises Fund (CXSE)
ETF Trends CEO Tom Lydon discussed the
WisdomTree China ex-State-Owned Enterprises Fund (CXSE) on this week’s “ETF of the Week” podcast with Chuck Jaffe on the MoneyLife Show.
CXSE seeks to track the WisdomTree China ex-State-Owned Enterprises Index’s price and yield performance, which is a modified float-adjusted market cap-weighted index that consists of common stocks in China, excluding common stocks of “state-owned enterprises.” Chinese companies that are not state-owned enterprises are defined as government ownership of greater than 20%.
The fund is a tailored emerging market play that cuts out inefficient state-owned businesses. In regards to state-owned enterprises, government ownership can negatively impact the operational efficiency of a company. Government-owned and influenced companies typically run their businesses with a broader set of interests, appealing more to government wish