You don’t often see a move like this in a bond market. This the long term, high grade corporate bond ETF from SPDR, up 6.6% in the last month.

lwc

I chose this chart because of what it shows about modern markets, which don’t allow for much introspection on the part of investors. We’re all traders now and when the momentum hits an asset you better get on or you’ll miss the ride entirely. I don’t know of any massive change in fundamentals for long term (13 year duration), investment grade (90% A and BBB) bonds over the last month that would account for a 6.5% move.

So, what makes something normally sedate like this move that much? There doesn’t appear to be any significant short interest in LWC itself but maybe there were shorts in the underlying bonds that needed covering. Or maybe it is a function of bond market liquidity which is a problem for buyers and sellers. This was across the board in investment grade corporate bond ETFs so it isn’t anything specific to LWC.

Whatever the cause, I think one ought to tread carefully here. Vertical moves like this is are generally unstable and subject to quick reversals.

We are long LWC and LQD in our portfolios.

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For information on Alhambra Investment Partners’ money management services and global portfolio approach to capital preservation, Joe Calhoun can be reached at: jyc3@4kb.d43.myftpupload.com or  786-249-3773. You can also book an appointment using our contact form.

This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product. Investments involve risk and you can lose money. Past investing and economic performance is not indicative of future performance. Alhambra Investment Partners, LLC expressly disclaims all liability in respect to actions taken based on all of the information in this writing. If an investor does not understand the risks associated with certain securities, he/she should seek the advice of an independent adviser.