Bonds Yields Boosted by New U.S.-Canada NAFTA Agreement

“Resolution of the trade discussions with Canada after the deal done on Mexico is more relevant today to markets than the details (modest tweaks from NAFTA 1.0). China of course remains the main trade story but American business and its partners to the North and South can now breathe a sigh of relief that this is now done and not subject to more tariffs and the threats of them,” wrote Peter Boockvar, chief market analyst at Bleakley Advisory Group.

Related: Trade Wars Do Not Concern Fed Chair Just Yet

High-Yield Bond ETFs Move Higher

The new NAFTA deal also boosted high-yield bond ETFs like the iShares iBoxx $ High Yield Corp Bd ETF (NYSEArca: HYGand PIMCO 0-5 Year High Yield Corporate Bond (NYSEArca: HYS)–HYG was up 0.23% and HYS rose 0.23% as of 1:45 p.m. ET. Last week, bond yields were the beneficiary of the Federal Reserve instituting a third rate hike for 2018 with an increase of 25 basis points to its current federal funds rate level of 2.25.

HYG tracks the investment results of the Markit iBoxx® USD Liquid High Yield Index, which is comprised of high yield U.S. corporate bonds that have less than investment-grade quality. HYS seeks to provide total returns that closely correspond to the ICE BofAML 0-5 Year US High Yield Constrained Index, which is comprised of U.S. dollar denominated below investment grade corporate debt securities publicly issued in the U.S. domestic market with remaining maturities of less than 5 years.

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