Stocks & Commodities V. 30:6 (12-17): Trading High-Yield Bonds Using ETFs by Brooke Gardner

Stocks & Commodities V. 30:6 (12-17): Trading High-Yield Bonds Using ETFs by Brooke Gardner
Item# 320GARDPDF
Availability: In Stock

Product Description

Trading High-Yield Bonds Using ETFs by Brooke Gardner

In the high-risk arena of high-yield bonds, itís a good idea to use a trading system that avoids large drawdowns. Try applying a simple moving average.

IN 2008, when investors dumped assets of all kinds, high-yield bonds yielded about 20% interest. Since then, the subsequent rebound of about 75% has become so dramatic that many wonder if the high-yield bond market could be ready for another plunge.

The large drawdowns of high-yield bonds make for risky investing. Investors need to find a way to avoid these large down drafts, such as slightly improving the high-yield bondsí total return by using an eight-month simple moving average (SMA).

According to The Economist, high-yield bonds returned some 15% last year after a 58% rise in 2009. Price levels surpassed the highs of 2007 (see Figure 1). Since then, the returns have been partially fueled by income investors seeking higher yields in a low-return bond market. But too many people have evidently gone into the market at one time as investment banks have earned $5.8 billion in high-yield bond fees, more than they made from investment-grade bonds.

Trend-following works well on high-yield bonds because they autocorrelate. Autocorrelation means that on an up day, the following day can be expected to be up also. Autocorrelation also works for down days, the upshot being that high-yield bonds form trends, and those tendencies can be identified with any moving average, especially one that avoids whipsaws.

*Note: $2.95-$5.95 Articles are in PDF format only. No hard copy of the article(s) will be delivered. During checkout, click the "Download Now" button to immediately receive your article(s) purchase. STOCKS & COMMODITIES magazine is delivered via mail. After paying for your subscription at users can view the S&C Digital Edition in the subscriber's section on

Take Control of Your Trading.
Professional Traders' Starter Kit
All these items shown below only $299.99!
  • 5-year subscription to Technical Analysis of STOCKS & COMMODITIES, The Traders' magazine. (Shipping outside the US is extra. Washington state addresses require sales tax based on your locale.)
  • 5 year access to S&C Archive
  • 5 year access to S&C Digital Edition
  • 5-year subscription to Advantage.
  • 5-year subscription to Working Money.
  • Free book selection.
  • Click Here to Order