The Chase is On

• Posted by Robert Sinn
• on July 18th, 2012

The chase for yield hit full throttle today as investors continue to pile into corporate bonds – both $HYG (high yield corporate bond ETF) and $LQD (investment grade corporate bond ETF) hit new all-time highs (dividend adjusted):

 

 

Other yield sensitive sectors such as REITs ($IYR) and mortgage REITs ($NLY) also continue to perform exceptionally well in a sign that investors are willing to drive share prices to new multi-year highs on an almost daily basis as they reach for juicy dividend yields. Portfolio manager David Schawel has the following to say about the current state of the MBS market and shrinking spreads:

“Tons of demand from banks, REITS, money managers & others both front running the Fed & those wanting to express a view of short vol.”

Pardon my skepticism but something about this chase for yield has me repeating the Warren Buffett axiom “be fearful when others are greedy” over and over again in my head.

 

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