What is the iBoxx index?
What is the iBoxx index?
iBoxx are independent bond indices which are based on multi-source pricing for improved accuracy. They serve as tools for passive or active portfolio management, ETFs and structured products. The indices cover major and minor currencies in all key bond segments.
What is iBoxx TRS?
iBoxx Standardized TRS contracts enable investors to gain or hedge exposure to the bond and leveraged loan markets easily and efficiently. They benefit from providing zero-tracking error to the underlying index and from strong liquidity due to their standardized trading structure.
Is Lqd a good investment?
LQD, given it was first to market in this space, is easily one of the most popular corporate bond ETFs. The ETF is notable for a broad portfolio of bonds from the Markit iBoxx USD Liquid Investment Grade Index, whose underlying liquidity may contribute tight tracking and subdued premiums / discounts.
What are fixed income indexes?
A broad index providing exposure to the global sovereign fixed income market, the index measures the performance of fixed-rate, local currency, investment-grade sovereign bonds. It comprises sovereign debt from over 20 countries, denominated in a variety of currencies.
What is a TRS trade?
A total return swap is a derivative contract where one counterparty pays sums based on a floating interest rate, for example Libor plus a given spread, and receives payments based on the return of a reference asset such as a bond, stock or equity index.
What type of bond is Lqd?
LQD is an investment-grade corporate bond index ETF. LQD offers investors a paltry 2.4% dividend yield, and could suffer significant losses if interest rates continue to increase.
Can you lose money in a bond?
The Bottom Line. Can you lose money on bonds and other fixed-income investments? Yes, indeed; there are far more ways to lose money in the bond market than people imagine.
What is a good fixed income benchmark?
In fixed income, examples of top benchmarks include the Barclays Capital U.S. Aggregate Bond Index, the Barclays Capital U.S. Corporate High Yield Bond Index, and the Barclays Capital U.S. Treasury Bond Index.
What are the main bond indexes?
Common indexes include the Dow Jones Industrial Average, the S&P 500, the Nasdaq, and the Russell 3000.
How do I value my TRS?
To price a total return leg of a total return swap, calculate the expected price returns from the reference asset by comparing the forward prices from period to period. These price returns are present valued back to the value date.
How do you hedge TRS?
The payer in a TRS creates a hedge for both price risk and default risk of the reference asset, although the payer in the TRS is a legal owner of the reference asset. Investors who cannot short securities may be able to hedge a long position by paying the total rate of return in a TRS.
Is LQD a good ETF?
LQD focuses on investment-grade corporate bonds, with a median credit rating of BBB. This is a reasonably good rating, indicative of reasonably strong companies, with good balance sheets and financials. Risk and default rates are both quite low.