LQD 3d Chart, Q2 2024Sharing the LQD chart for investment grade corporate bonds. Looking at the way interest rates are moving, if this breaks down, I would expect this to coincide with a short term top in equities. This is also matching up with some of the weakness TLT is currently showing. by cmerged0
Time to buy LQD Investment Grade Corporate BondsAMEX:LQD A good time to become a bond holder, as central banks lower interest rates going into next year newer bonds get issued at lower interest making your existing bonds more valuable over time all whilst receiving a decent coupon paid out as a dividend.Longby JaredBooysenUpdated 1
$LQD Double bottom Weekly ChartAMEX:LQD The weeks not over yet but we do like LQD with a double bottom looking for a weekly close of the previous weeks high. Longby AlgoTradeAlert3
Introduction to Relative Strength or Ratio 1-2In part one (linked) we discussed how to construct and use relative strength ratios (RS) in trading and analysis. We also discussed common errors and best use. In part two we finish that general discussion. In part three we will analyze consumer staples verses consumers discretionary and begin to discuss other ratios that I find useful. How do spreads correct? One mistake is assuming that a spread will always be corrected by the rich security moving lower to meet the cheaper security. In actuality there are multiple ways a spread can correct. For instance, the rich market corrects lower relative to the cheaper market, the rich market declines while the cheap market rises, or the rich market remains relatively fixed while the cheap market rallies. And remember, this is all done within the context of the broader market trend. This isn't particularly important when using spreads as informative to the business or market cycle (as I do). But if you are trading pairs (which outside of rates markets, I don't) the legs should generally be market neutral or directionally ambivalent. Along this same line, if the dollar value of the two legs is vastly different, the share counts must be adjusted to close to money neutral or the disproportionally large side of the trade will dominate. This can also be an issue when the notional amounts of the two instruments are very different. For instance, two-year futures verses ten-year futures. Twos represent 200k notional while tens represent 100k notional. They also have far different sensitivities (duration) to a given change in rates. It should also be recognized that some sectors or ETFs are dominated by one or two very large names that skew directionality in favor of those few names. Looking for ETFs comprised of equally weighted components will mostly eliminate this issue. For instance equal weighted consumer staples (RSPS) verses equal weighted consumer discretionary (RSPD). It's extremely important that you know what you are measuring. A good example is the change in the ratio between investment grade bonds (LQD) and high yield bonds (HYG). A quick glance at the chart might suggest that High Yield is weakening relative to Investment Grade. The easy conclusion would be that fundamentals in the high yield sector were deteriorating and investors were exiting HYG. While fundamentals are modestly deteriorating in HYG more quickly than in LQD, the dominant driver is the difference in duration between the two sectors. This can be seen when running the ratio between ten year and three-year treasuries and comparing it to LQD/HYG. Many analysts smooth the RS line with moving averages. This is particularly useful when adjusting for the higher volatility of shorter time frames. This isn't my preference. First, I prefer to use longer periods (particularly weekly) in my analysis. Second, while averages are useful, they aren't an essential part of my own analysis toolkit. But there is value and moving averages can be used on spreads just as they are used on the underlying securities. Finally, ratios can provide tremendous insight into economy and market cycles, for instance when, after a long RS decline, copper begins to strengthen relative to gold, the industrial economy may be entering the early stage of recovery. Or when consumer staples RS inflects higher relative to consumer discretionary it's likely that the outlook for the consumer, and by extrapolation the economy, is weakening. In future parts we will discuss and illustrate several of these ratios. And finally, many of the topics and techniques discussed in this post are part of the CMT Associations Chartered Market Technician’s curriculum. Good Trading: Stewart Taylor, CMT Chartered Market Technician Taylor Financial Communications Shared content and posted charts are intended to be used for informational and educational purposes only. The CMT Association does not offer, and this information shall not be understood or construed as, financial advice or investment recommendations. The information provided is not a substitute for advice from an investment professional. The CMT Association does not accept liability for any financial loss or damage our audience may incur. Editors' picksEducationby CMT_Association77231
I'm buying the LQD Investment Grade Corporate Bond ETFUS Interest Rates have been raised to 5.25% and inflation has fallen down to 5%... an inflection point has been reached, the US seems to have inflation under control ahead of the UK and the Euro zone. I'm buying the AMEX:LQD Investment Grade Corporate Bond ETF as newer issued bonds my be issued at lower interest rates, increasing the value of the bonds I'm holding in the LQD Bond ETF. This will be a long term trade. In time interest rates will have peaked and the FED will start lowering rates to stimulate the economy again.... the yield curve will eventually start to normalize too.Longby JaredBooysen1
The Sh!t is going to hit the FAN still ahead if we break .618The chart posted is that of debt in corp market lqd We bounced off the .618 in what looked to be a large ABC DECLINE .But it can also be counted now as wave 5 of 3 down which would mean we would see another leg down to 89. 8 soon by wavetimer3
short term bullish but forming head and shoulders short set upbearish head and shoulders pattern forming. the rise of the right shoulder is short term bullish. this is to test the previous resistances of Elliott Wave #3, and to test the previous support levels of (A) and (C)...I'm stalking a short entry near or slightly above those levels. Also goes with my theory of favoring short term corporate bonds. I think they are undervalued. Shortby moneyflow_trader0
Why Corporate Bonds are not a good option for Retail InvestorsCorporate bonds or tradeable debt instruments issued by corporations are a type of fixed income security. Given the recent media attention and the rising demand for fixed income investments among retail investors, it may come as a surprise that they are not suitable for all investors. Corporate bonds have different risks associated with them than other fixed income investments like savings accounts, money market funds, and even municipal bonds. If you are considering investing in corporate bonds or are already holding some in your portfolio, here is why you should avoid them as a retail investor What is a Corporate Bond? A corporate bond is a debt instrument issued by a corporation to raise money. Corporate bonds typically have a set maturity date after which the outstanding principal will be repaid. There are many kinds of corporate bonds, including investment grade and high yield, government and non-government, and they can be issued in local or foreign currencies. Corporate bonds are often traded on the secondary market, which means they are liquid and can be bought and sold easily. Investors earn a return on corporate bonds by receiving interest payments and by the increase in the bond’s value as it matures. The interest rate on a corporate bond is based on factors like the company’s credit rating, the length of time the bond is outstanding, and the bond yield in the market at that time. Corporate bonds are typically less liquid than stocks, and may have shorter holding periods, especially if you purchase them on the secondary market. Risks of investing in Corporate Bonds Corporate bonds are considered a form of debt financing, and as such, there are risks associated with holding them. The main ones are default, liquidity, and interest rate risk. - Default risk - Investing in corporate bonds entails the risk that the issuing company will default on the payment of interest or the repayment of principal. However, since corporate bonds are issued by companies in different industries, there is a low probability that they will all default at the same time. - Liquidity risk - The risk that you will not be able to sell the investment in a timely fashion at a price that is attractive to you. - Interest rate risk - The risk that if you hold the investment until maturity, you will earn a lower rate of return because interest rates will have risen in the meantime. Why you should avoid Corporate Bonds as a Retail Investor While corporate bonds may be suitable for institutional investors, they are not a good option for the average retail investor. For one, you will have to educate yourself on the various types of corporate bonds, their risks and returns, and what kind of companies you should be investing in. Even if you are successful at taking this on, you are likely to end up with a very concentrated portfolio, which brings us to the next problem. The other issue is that retail investors typically hold a small number of bonds and these bonds are often concentrated in a few issuers. This is not a good strategy because if a company defaults, you could lose a large portion of your capital. This is clearly a bad strategy. So, How about Investment grade debt ETFs? LQD, In a rising interest-rate scenario. The bonds' tenure is clearly working against them, especially since unemployment continues to fall at an astonishing rate. This is not the time to invest in this ETF if the Fed raises interest rates to combat inflation. In order to completely comprehend this analysis we must know how important the duration is, while investing in bonds. Duration is an important topic. It is the bond's effective maturity, which means it is oriented to something lesser than the time of the bond's final payment since part of the bond's value, generally from coupons, happens earlier in the bond's existence. If a bond has a longer effective maturity at a fixed interest rate, it indicates that investors are tied to an interest rate that was once market for a longer period of time, and if rates increase as they are currently, you will be bound to an uneconomical rate for a longer period of time. Simply put, longer term bonds lose value more severely when interest rates increase. How maturity of a these bonds (Duration) is affecting LQD Unemployment has gone down despite the increased rates, which has surprised many analysts. The Phillips Curve is back in force, where low unemployment yields high inflation if inflation is kept down, and contrary to common perception, Consumer spending has declined, but unemployment is so low that it might rise again unless the Federal Reserve, which is committed to lowering inflation, continues its anti-inflation campaign. The Federal Reserve has raised rates as well as given gloomy recession predictions, and more banks are following its lead, including the Bank of England. LQD, which has dropped 14% this year, have long-duration bonds, majority of fixed-rate, which is concering for this ETF. Credit Spread Global Cooperate Bonds in general Corporate bonds continuing their strong performance in July, producing $80 million (+76% year on year). July was the most profitable month of the year for CBs . Their revenues in 2022 have exceeded from 2021 ($512 million). Average balances increased by 9.8% year on year, average costs increased by 59% year on year, and usage have increased by 27% year on year. Spreads on non-investment grade and high yield bonds continue to widen as corporate prospects deteriorate owing to weakening consumer demand and stricter financial conditions. In-turns , asset values fall, yields rises, and borrower demand increases. However, CG Debt funds have seen the highest monthly outflows in May and June (-$73.7 billion) In July, High Yield Bonds enjoyed the relieve rally. Interest rates vs Corporate Bonds comparison Alternatives to Corporate Bonds for retail investors For retail investors, the most advisable option is to go with government bonds. Government bonds have historically offered a lower risk profile compared to corporate bonds. The best way to go about investing in government bonds is to go for a diversified bond fund. Using a bond fund reduces the risk associated with investing in bonds further as the fund manager may hold a large number of different bonds. If you are looking at a short-term investment horizon (less than 10 years), then you could also opt for short-term government bonds. If you have a long-term horizon, then you could consider a long-term government bond fund. Savings accounts, money market funds, and short-term government bonds are very liquid forms of low risk investment options. Conclusion It is important to understand that the corporate bond market is not risk-free. When interest rates are rising, corporate bonds are generally falling in price as they are competing against government bonds with lower interest rates. In times of economic uncertainty or when interest rates are rising, the risk of default is generally higher for companies issuing corporate bonds. Thus, it is advisable to invest in corporate bonds only when the economy is growing steadily. For retail investors, the best options are to go with government bonds or short-term government bonds. These are low risk, liquid investments and will help you achieve your financial goals.Editors' picksEducationby EQTSHARES1212127
$spy $tlt $lqd Time to buy some investment grade bondsThey are at their highest relative yield vs stocks in decades @ 2.71% and sitting on huge support. Stocks are still a short on any rallyby shawnsyx680
Fed's Catch-22A Catch-22 is a problem for which the only solution is denied by a circumstance inherent in the problem or by a rule. This is exactly the problem the Federal Reserve faces. Historic inflation continues to accelerate, becoming embedded into the market's expectations and risking a spiral effect In order to stop rapid inflation, and achieve its mandate of price stability, the Fed must raise interest rates as rapidly as inflation is rising. The Fed cannot raise interest rates as rapidly as would be needed to slow rapid inflation because it would rapidly begin to freeze liquidity in the corporate bond market. Rapid tightening would spillover to corporate earnings, asset prices, consumer borrowing and spending, economic growth and ultimately employment, countering the Fed's mandate of maintaining stable employment. The last time that investment grade corporate bond prices fell below their monthly EMA ribbon support was in March 2020, when the Fed made emergency purchases of corporate bond ETFs to ensure liquidity. Now the bond prices are falling below their monthly EMA ribbon support and the Fed is taking the exact opposite measure by calling for accelerated rate hikes. Is it possible to avoid a recession at this point? Only time will tell but the charts seem to doubt it.by SpyMasterTrades444
MAJOR BUY A LOW IN PLACE IN LQDWe held and dropped into a .618 and waves a x 1.1618 = wave C We will now see a major up move keep stops at 117.40best of trades WAVETIMER BTW THIS SHOULD BE RATHER BULLISH FOR STOCK INDEXESLongby wavetimerUpdated 2
LQD CORP GRADE DEBT MUST HOLD 117/118 I am seeing a collapse in high grade Corp debt based on fib relationships the focus point is all at 117/118 if we break this then I think the whole thing comes apart for everything . Shortby wavetimer1
LQD .382 A BOTTOM IN CORP DEBT The chart posted you should keep an eye on as we pulled back to support at .382 of the rally from 2020 panic low in 3 waves down ABC decline by wavetimer1
Credit Monitoring Basics: A Must Have SkillThese data series are all available in the Trading View platform. Since the turn of the year the price of LQD, the investment grade corporate credit ETF, has declined nearly 10 points (-7.3%) and since early August is down 13 points (-10%). The important question is…. Why? Knowing how to monitor credit is an important skill, particularly since so many in the commentary or advice business so misunderstand it. In this post I want to provide basic tools that will allow you to perform a down and dirty evaluation. Why is credit so important? The Federal Reserve is much more sensitive to credit distress than they are to equity distress. If companies are unable to secure funding, they may face liquidity problems, and liquidity problems have the potential to become systemic. In 2008 and again in 2020 credit markets were, in essence, frozen. Particularly in 2008, even short term funding markets froze. There were plenty of offers but in many cases no bids. Being an old bond guy, I may be prejudiced, but credit makes the economy go and in general terms is much more important to short term functionality than equity. I think the Fed is more responsive to credit market functionality than it is to equity distress. Listening to the angst of the want-to-be macro analysts or simply looking at the price of credit ETFs like LQD or HYG might lead one to believe that credit was generating an economic warning or danger sign. That narrative is, at least for now, false. Corporate bond yield has two primarily components: • Base rate: In the case of fixed coupon corporates the base rate is the nearest maturity on-the-run (most actively traded) U.S. Treasury (TR). The base rate is generally thought of as the risk free rate. • Spread to the base rate: The spread above the base rate compensates credit investors for the higher risk of default and downgrade and the wider bid-offer (liquidity) spreads involved in corporate trading. • For instance: 10 year Treasuries yield 2.00% and a ten year XYZ corporate security is offered at 120 basis points (bps) to TR. All-in-yield for XYZ is 3.20%. Because there are two primary constituents of a corporate yield, price change can be driven by two things. • Changes in the base rate. In other words, changes in treasury yields. • Changes in the credit spread. Spreads widen/narrow to the base rate as investors seek additional/less compensation for default, liquidity and downgrade risk. Normally the primary driver of changes in corporate ETFs and indices is change in the base rate/treasury yields. Said another way, TR yields are more volatile than corporate spreads. • Big changes in Treasuries equate to big changes in corporate bond prices. Chart 1: This is a long term chart of IEF (7-10 year Treasury ETF) plotted with LQD (the investment grade bond ETF). • You can see how closely the two correlate. • There will be some difference due to differences in duration (a measure of rate sensitivity) of the index versus the duration of the Treasury and changes in the spread component. • But, clearly, changes in Treasury rates have an outsized influence on corporate bond rates/prices. Chart 2: Option adjusted spread of the ICE BofA Investment Grade (IG) and High Yield (HY) Corporate Index's: • The OAS offers a way to assess the credit spread component of a corporate bonds yield. • Investment grade index is +1.08% to the base rate. • High yield spread is +3.44% to the base rate. ○ There is more default risk in high yield, so the compensation, or spread to the base rate, is correspondingly higher than that of IG. • Both IG and HY spreads remain very near historic lows with very little evidence that credit investors are growing fearful of default, downgrade, or liquidity risk. Chart 3: All in yield BBB corporate index (top), BBB OAS or credit spread (center) and ten year treasury note yields (bottom). • The all-in-yield, of the ICE BofA BBB index has risen significantly over the last few months. ○ Remember that in a bond, higher yields equate to lower prices. So a higher all-in-yield means that corporate bond prices are lower. • BBBs are the lowest rating category of the Investment grade index and are more sensitive to the ebb and flow of default and downgrade risk than the investment grade index as a whole. • While the all-in-yield has risen sharply over the last few months the OAS has barely budged from support. Investors are not yet demanding more compensation for default risk. The change in corporate pricing has been driven by the sharp rise in rates. Bottom Line: To understand the state of the credit market, you have to assess both changes in rate and changes in the spread. Hopefully you now have the tools to do a down and dirty assessment of your own. Good Trading: Stewart Taylor, CMT Chartered Market Technician Shared content and posted charts are intended to be used for informational and educational purposes only. The CMT Association does not offer, and this information shall not be understood or construed as, financial advice or investment recommendations. The information provided is not a substitute for advice from an investment professional. The CMT Association does not accept liability for any financial loss or damage our audience may incur. Editors' picksEducationby CMT_Association4040279
SELL LQD Target 125The idea is that some corporate bonds will get hurt next days/weeks. Increasing default rate as Free Cash Flow from operations is not growing enough to cover debt service.by PACDealer0
Credit - The Second Wave - EvergrandeIdea for Credit: - Stocks had a bit of a reprieve as China's collapsing property firms were halted for 2 weeks, and China's markets had gone on holiday for Golden week. - Stock market had an unwinding of hedges last week, but are things really 'Back to Normal'? - The bond market does not think so, and seems to be presaging more drawdown to come. - EM High Yield has been in capitulation, while US Corporate bonds and HY are accelerating their declines. - High Yield Spreads are about to breakout. - This is a problem that has not simply gone away, but rather will only get worse. - Nikkei had even erased all losses of the year in 2 weeks, then lost them again in 2 weeks more, to continue its bear market: - Remains to be seen how far-reaching the effects will be on China's 5T property market. The drag on global property market is real: More to come on that later. The stock market has its best days in bear markets as volatility increases, and this is really telling of the situation. I think we are already in a global bear market and recession. 110 1911 222 GLHF - DPTShortby UnknownUnicorn1043646Updated 1114
CORP DEBT The Canary in the COAL MINE The chart posted is give a clear warning of new issues that are close to coming out !Shortby wavetimer222
LQD in a 2007 - 2008 fractal?Have to just wait and see. My ide is that we are in for a market top in late march 2022 and a very big bust there after.by BullsOfHymir110
No Folks Bonds are not Dead!!!No Folks Bonds are not Dead!!!, when 10YR yield is negative, these will look just fine!Longby azdevil1
Credit - LQD ShortIdea for LQD: - Investment Grade Credit possible Head & Shoulders. - Short PT 111. GLHF - DPTShortby UnknownUnicorn10436463
is the debt the cause of the problem and selling?corporate debt etf, mbb mortgage backed securities, and tlt treasuries all have similar price action. could the fear of inflation be hitting the debt markets and be the cause of future stocks sells offs as risk taking fades in both?by optionfarmers0
Scenarios for yield curve control.After the bull run (due to the cut of the interest rates and Quantitative easing from the FED), the LDQ ETF has been distributing since late July. Historically, the 0.786 and the 0.618 retracements are an inflection point, where the previous trend reverses. We can see this pattern in all assets with an institutional interest. Until now, the FED is letting the inflation expectations run to justify later the money printing and yield curve control. Therefore, I expect a five-wave impulse to the downside or maybe a big ZigZag around the retracements mentioned before.Shortby LiquidityMaster0