Above the Fold

Bond Beating Hits Corporates … Is It Time to Buy?

It’s no secret that investors have been selling U.S. Government bonds at an accelerated pace. Bond yields (which have an inverse relationship to prices) have been creeping higher across the board, with the benchmark 10-year rocketing up past 1.70%. The jury is still out on just how high the 10-year will climb, but many respected analysts are looking for continued upward pressure in yield over the next couple years, likely into the 2% to 2.5% range by 2023. 

But Treasuries aren’t the only debt securities getting sold. Top-tier corporate debt has also seen a rout, logging its second worst year-to-date performance since 1996. Bond prices for highly rated companies have already lost 5.4% this year, according to Bloomberg Barclays data. As yield’s rise, these same corporations (and others) are scrambling to lock-in low rates, even if it means steep penalties to do so. This action suggests yields are unlikely to drop, but there’s more to the story. The spread between high-quality debt and riskier bonds is still historically narrow, suggesting investors aren’t being properly compensated for taking on increased risk. 

Put simply, the current landscape is one that likely requires a little more skill and tact, especially after a years-long bond rally that has amplified bonds’ current relationship (called duration) to rates. 

Three Things 

1. The Best Selling EV in the World Is Not a Tesla – Costing roughly $4,500, the Hong Guang Mini EV (electric vehicle) outsold Tesla’s Model 3 globally for the first two months of the year. The little hatchback is produced under a joint partnership between China-owned SAIC Motor, Wuling Motors and General Motors. The car is currently offered only in China, but could start selling in other countries. It has a blazing top speed of 62 miles per hour and a range of about 106 miles. 
2. Megamerger Tightens Canada-US-Mexico Trade Network – Two of North America’s largest railroads recently announced a merger that should speed up trade and lower costs between the United States, Canada and Mexico. Canadian Pacific agreed to purchase Kansas City Southern in a deal worth roughly $25 billion. The deal still faces some antitrust hurdles, but is expected to move forward. 
3. Hospitals Still “Hiding” Their Rates – A rule passed by President Trump late last year required health care providers like hospitals to disclose the prices they charge, along with private cost-sharing relationships with insurers. While many have begun to comply with the rule, some of the nation’s largest health care systems are using complex blocking codes to prevent the prices from appearing in searches. Others are burying the data deep within their websites, according to a recent Wall Street Journal report. 

Did You Know?

Hackers and Winter Storms Aren’t the Biggest Threats to Our Electrical Grid

Though recent weather events have brought equipment and system weaknesses to light, there are even bigger threats to America’s electrical grids — squirrels. In certain parts of the nation, they are the No. 1 reason for outages and can trigger blackouts for hundreds of thousands of customers. May and June tend to be busy seasons for the troublesome creatures, but there have been recent spikes later in the year around October and November. To date, hackers have not actually triggered a blackout in America, but are reportedly probing networks of some electricity providers.