United States Treasury yields ticked higher across the board in conjunction with the Conference Board’s Consumer Confidence Index, which registered its highest reading since October 2000. The feel-good vibes of the S&P 500 becoming the longest bull market recorded and the Nasdaq Composite breaking the 8,000-point barrier appear to be evident with respect to the index.
The benchmark 10-year yield went up to 2.882 while the 30-year yield climbed to 3.033. Short-term yields also edged higher with the 2-year going to 2.665 and the 5-year to 2.772.
The consumer confidence data also corroborates with CNN’s Fear & Greed Index, which is tilting to the right, indicating that emotions are positive regarding the capital markets.
“Expectations, which had declined in June and July, bounced back in August and continue to suggest solid economic growth for the remainder of 2018,” said Lynn Franco, director of economic indicators at the Conference Board. “These historically high confidence levels should continue to support health consumer spending in the near term.”
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Interest Rate-Hedged ETF Gains
With consumer sentiment at a high and the Federal Reserve primed for interest rate hikes through the rest of 2018, the economic landscape provides the perfect breeding ground for an interest-rate hedging strategy, such as the Xtrackers Inv Grd Bd Intst Rt Hdg ETF (BATS: IGIH).
IGIH seeks investment results that track the performance of the Solactive Investment Grade Bond – Interest Rate Hedged Index where a portion IGIH’s total assets will reside in long positions in U.S. dollar-denominated investment-grade corporate bonds. As in the case of IGHG, this strategy effectively eliminates exposure to riskier bonds with fund allocations in investment-grade issues.
The increased sentiment felt throughout the markets could translate into more risk-on investment capital allocations, which could benefit IGIH.
“Confidence is soaring to new heights which makes us bullish on growth and forecasts that this expansion may indeed shatter records for longevity next summer,” said Chris Rupkey, chief financial economist at MUFG Union Bank in New York.
For more trends in fixed income, visit the Rising Rates Channel.