ETF of the Day - US Bonds Breaking Down

Shares of the extremely popular iShares Barclays 20+ Year Treasury Bond ETF ($TLT) are down 1.3% today and are trading at the lowest level in over two months. This action has occurred as the yield on the 30-Year Treasury yield is back to 2.83%, well above the 2.45% hit just a few weeks ago.

As money flows into stocks and out of bonds the price of U.S. Treasuries will fall and yields will increase. ETFs that invest in U.S. bonds will also fall in price as they have an inverse relationship to the yield on the Treasuries.

As TLT and its peers fall, the ETFs that are short U.S. Treasuries will rise. The ProShares Short 20+ Year Treasury ETF ($TBF) is up 1.4% today and have risen 6% in the last two weeks. Investors that are ready to give up on TLT can either sell their shares or be more aggressive and sell and turn around and go long TBF.

Junk Municipal Bonds Hit the WSJ

In this weekend's edition of the Wall Street Journal a columnist looks at the allure and relative value of high yield municipal bonds. The "junk" status bonds are often viewed as risky due to an elevated default risk, however the article shows that they are actually less likely to default than high yield corporate bonds.

Here at Penn Financial Group we have been investing in junk municipal bonds for years and after Meredith Whitney's terribly wrong call on municipals I adamantly backed the sector on TV and in the major newspapers. We have owned the Market Vectors Municipal High Yield Bond ETF ($HYD) for well over a year and have some big unrealized gains.

I suggest you look over the article if you are interested in learning more about the sector.

Click Here to Read.

Also give us a call/email if you wan to learn about other ETFs we are investing in before the major media find them.

1-877-383-7366
info@pennfinancialgroup.com

US Corporate Bond Sales at Record

US Corporate Bond sales came in at $427 billion during the first quarter, easily beating the prior record of $397 billion set last year. Before the recent sell-off in corporate bonds the yield was at 3.4% for investment-grade, the lowest number since 1986, when the recording started.

Corporations are taking advantage of the low interest rates and borrowing money for expansion, etc. I will give the Fed credit in that by keeping interest rates low it allows for corporations to borrow at low rates, a big plus for stock performance.

The iShares Corporate Bond ETF ($LQD) is up 2% in 2012 and yields 4.24%.

The SPDR High Yield Corporate Bond ETF ($JNK) is up 3% and yields 7.28%.

VERSUS

The iShares 20+ Year Treasury Bond ETF ($TLT) that is down 6% and only yields 3.37%.

Hmmmm Corporations versus governments? I will go with LQD and JNK all day!!

ETF of the Day - Health Care ETF XLV

As Obamacare gets to make its way to the Supreme Court the health care stocks are not blinking an eye on they way to new highs. The SPDR Health Care ETF ($XLV) is up another 1.4% this morning and is now trading at a 5-year high.

The ETF is composed of pharmaceuticals (50%), health care providers (19%), medical equipment (16%), biotech (11%), life sciences (4%). The top 4 stocks are all drug companies ($JNJ, $PFE, $MRK, $ABT) that have been doing very well in both a risk-on and risk-off market environment.

The eventual ruling on whether Obamacare is constitutional will likely have some impact on the ETF, but any decision will have its pros and cons on the sector. What I like about $XLV is the exposure to pharmaceuticals, which are poised to continue moving higher, as well as the 2% dividend yield. Throw in the bullish chart and $XLV looks like a winner.

Random 52-Week Highs

The list of stocks/ETFs hitting new highs is growing as the major indices break out to multi-year highs. What I find interesting is that not only are the popular names breaking out, but so are some of the lesser-known stocks and ETFs. Here are a few that may surprise investors.

• PowerShares Emerging Markets Sovereign Debt ETF ($PCY) - The basket of emerging market debt has surged straight higher after bottoming in early January. Along with the ETF breakout out to new highs, it pays a 5.2% dividend.
• Target Corp ($TGT) - The discount retailer typically does well during slow growth environments and when the risk-on trade is off. However this time around the retailer is enjoying success as it hits a new high today.
• Brookfield Infrastructure Partners ($BIP) - The company owns and operates various infrastructure properties around the globe. They include shipping terminals, LNG production facilities, etc. With the global economy still not at high growth levels it may be surprising this company is doing so well. It also pays a 4.8% dividend.

** My firm owns shares for all three mentioned for some of our clients.