Foreign Bonds Rallied Last Week As Dollar Dipped And Stocks Fell

The first week of November wasn’t kind to stocks, commodities, or real estate investment trusts (REITs), but a falling US dollar supported foreign bonds—the only corner of the major asset classes to post significant gains, based on a set of proxy ETFs.

Taking the top performance spot for the five trading days through last Friday (Nov. 4): PowerShares International Corporate Bond (PICB), which posted a 1.9% total return—the first weekly gain for the ETF since mid-September.

A key factor in foreign fixed income’s rally is a softer US currency. The US Dollar Index fell for a second week. Note, however, that the rally in offshore bonds wasn’t all-inclusive. In particular, emerging-market fixed income didn’t participate and instead posted a slight loss last week, based on VanEck Vectors JP Morgan EM Local Currency Bond (EMLC). On the other hand, investment-grade US bonds (BND) and inflation-index Treasuries (TIPS) inched higher.

Last week’s biggest loser (again): broadly defined commodities. The iPath Bloomberg Commodity ETN (DJP) fell for the third straight week, shedding a hefty 3.5% during the five trading days through Nov. 4.

Despite the advance in offshore bond markets, a generally negative bias defined last week’s trading action, which weighed on an ETF-based version of the Global Markets Index (GMI.F). This investable, unmanaged benchmark that holds all the major asset classes in market-value weights fell 1.0% over the five trading days through last Friday.

gmi-etfs-1wktr-barplot2016-11-07

Turning to one-year results, EMLC continues to hold the top spot. This ETF that tracks emerging market government bonds is up 8.9% in total-return terms for the 12 months through Nov. 4.

Meantime, commodities are still in last place among the major asset classes for trailing one-year results: DJP is down a modest 2.5% for the past year.

GMI.F’s one-year total return decelerated again last week, dipping to a gain of just 2.0% vs. the year-earlier level.

major-asset-classes-boxp-252-2016-11-07

<\center>

2 thoughts on “Foreign Bonds Rallied Last Week As Dollar Dipped And Stocks Fell”

  1. Christian Siewers

    Please go back to presenting the one year total return chart in the same manner as the one week chart. I find the current one year chart very confusing.

  2. James Picerno Post author

    Christian,
    Sorry to hear that. The rationale for the boxplot chart for 1-year returns is the deeper context for understanding how the current performance compares with recent history for 1-year performances. The good news is that the 1-year chart still has the basic 1-year results for the latest period via the blue dots. That said, I’ll consider your request.
    –JP

Comments are closed.