Interest rates continue to be held down by “unnatural forces” – the
policies of the Federal Reserve (Fed) – with the bond market focusing
closely on how those forces will be withdrawn over the next 12-24
months, according to Fran
Rodilosso, fixed income portfolio manager for Market Vectors ETFs.
“Today’s price action post the employment report notwithstanding, at
this point in the cycle, I believe equity markets are signaling
increased optimism while bonds are reflecting still low inflationary
expectations and a belief that the Fed will continue its easy monetary
policy, even as it tapers its asset purchases,” Rodilosso said. “In my
view, if you are an optimist on the U.S. economy, you should be a little
concerned about Treasury yields at 2.72 percent on the 10-year yield1.”
Rodilosso noted that investors who were bold enough to extend duration
at the beginning of 2014 have done quite well through the first quarter,
so that for the moment higher rates are not just a one-way trade. That,
however, is unlikely to persist in his view.
“A ‘normalization’ of rates over the next 1-2 years may not be as
dramatic as what we saw trough to peak in 2013, and the shorter end of
the yield curve may be the more vulnerable spot now, but I believe there
is still ample scope for the entire yield curve to shift upward,” the
Market Vectors portfolio manager said. “Investors should continue to
keep this in mind as they decide how they want to position their fixed
income portfolios.”
Mr. Rodilosso has over 20 years of experience trading and managing risk
in fixed income investment strategies, including more than 17 years
covering emerging markets. Among the Market Vectors ETFs under his watch
are Investment
Grade Floating Rate ETF (NYSE Arca: FLTR®), Treasury-Hedged
High Yield Bond ETF (NYSE Arca: THHYTM),
Emerging
Markets Aggregate Bond ETF (NYSE Arca: EMAGTM),
Emerging
Markets High Yield Bond ETF (NYSE Arca: HYEM®),
Emerging
Markets Local Currency Bond ETF (NYSE Arca: EMLC®), Fallen
Angel High Yield Bond ETF (NYSE Arca: ANGL®), International
High Yield Bond ETF (NYSE Arca: IHY®), and Renminbi
Bond ETF (NYSE Arca: CHLC®). As of
February 28, 2014 the total assets for these ETFs amounted to
approximately $1.4 billion.
1Source: Bloomberg
Please note that the information herein represents the opinion of the
portfolio manager and these opinions may change at any time and from
time to time. Not intended to be a forecast of future events, a
guarantee of future results or investment advice. Current market
conditions may not continue. Information contained herein has been
obtained from sources believed to be reliable, but not guaranteed. ©2014
Van Eck Global.
About Market Vectors ETFs
Market Vectors exchange-traded products have been offered since 2006 and
span many asset classes, including equities, fixed income (municipal and
international bonds) and currency markets. The Market Vectors family
totaled $34.0 billion in assets under management, making it the eighth
largest ETP family in the U.S. as of February 28, 2014.
Market Vectors ETFs are sponsored by Van Eck Global. Founded in 1955,
Van Eck Global was among the first U.S. money managers helping investors
achieve greater diversification through global investing. Today, the
firm continues this tradition by offering innovative, actively managed
investment choices in hard assets, emerging markets, precious metals
including gold, and other alternative asset classes.
There are risks involved with investing in ETFs, including possible loss
of money. Shares are not actively managed and are subject to risks
similar to those of stocks, including those regarding short selling and
margin maintenance requirements. Ordinary brokerage commissions apply.
Debt securities carry interest rate and credit risk. Interest rate risk
refers to the risk that bond prices generally fall as interest rates
rise and vice versa. Credit risk is the risk of loss on an investment
due to the deterioration of an issuer's financial health. The Funds'
underlying securities may be subject to call risk, which may result in
the Funds having to reinvest the proceeds at lower interest rates,
resulting in a decline in the Funds' income.
The Funds may be subject to credit risk, interest rate risk and a
greater risk of loss of income and principal than those holding higher
rated securities. As the Funds may invest in securities denominated in
foreign currencies and some of the income received by the Funds may be
in foreign currency, changes in currency exchange rates may negatively
impact the Funds’ returns. Investments in emerging markets securities
are subject to elevated risks which include, among others,
expropriation, confiscatory taxation, issues with repatriation of
investment income, limitations of foreign ownership, political
instability, armed conflict, and social instability. The Funds may loan
their securities, which may subject them to additional credit and
counterparty risk. The Funds may be subject to risks associated with
investing in high-yield securities; which include a greater risk of loss
of income and principal than funds holding higher-rated securities, as
well as concentration risk; hedging risk; and short sale risk. Investors
should be willing to accept a high degree of volatility and the
potential of significant loss. For a more complete description of these
and other risks, please refer to the Funds’ prospectus and summary
prospectus.
The “net asset value” (NAV) of an ETF is determined at the close of each
business day, and represents the dollar value of one share of the ETF;
it is calculated by taking the total assets of an ETF subtracting total
liabilities, and dividing by the total number of shares outstanding. The
NAV is not necessarily the same as an ETF's intraday trading value.
Investors should not expect to buy or sell shares at NAV. Total returns
are based upon closing “market price” (price) of the ETF on the dates
listed.
Fund shares are not individually redeemable and will be issued and
redeemed at their NAV only through certain authorized broker-dealers in
large, specified blocks of shares called “creation units” and otherwise
can be bought and sold only through exchange trading. Creation units are
issued and redeemed principally in kind. Shares may trade at a premium
or discount to their NAV in the secondary market.
Diversification does not assure a profit nor does it protect against a
loss.
Investing involves substantial risk and high volatility, including
possible loss of principal. Bonds and bond funds, in general, will
decrease in value as interest rates rise. An investor should
consider the investment objective, risks, charges and expenses of a Fund
carefully before investing. To obtain a prospectus and summary
prospectus, which contain this and other information, call 888.MKT.VCTR
or visit marketvectorsetfs.com. Please read the prospectus
and summary
prospectus carefully before investing.
Not FDIC Insured — No Bank Guarantee — May Lose Value
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