IGIB: Banking Exposure And Duration Concerns Under Trump

seekingalpha00:52

Historically low credit spreads make any credit risk uninteresting.Duration is also not favorable, with Trump's rhetoric and possible actions contributing to upward revisions in inflation expectations...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2486797009?lang=en_US&edition=fundamental","thumbnail":"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1934166657/image_1934166657.jpg","is_english":true,"pubTime":"2024-11-25 00:52","share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","id":"2486797009","market":"us","top_or_hot":-1,"title":"IGIB: Banking Exposure And Duration Concerns Under Trump","media":"seekingalpha","content":"<div>\n<p>Historically low credit spreads make any credit risk uninteresting.Duration is also not favorable, with Trump's rhetoric and possible actions contributing to upward revisions in inflation expectations...</p>\n\n<a href=\"https://seekingalpha.com/article/4739930-igib-banking-exposure-and-duration-concerns-under-trump\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>IGIB: Banking Exposure And Duration Concerns Under Trump</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nIGIB: Banking Exposure And Duration Concerns Under Trump\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-25 00:52 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4739930-igib-banking-exposure-and-duration-concerns-under-trump><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Historically low credit spreads make any credit risk uninteresting.Duration is also not favorable, with Trump's rhetoric and possible actions contributing to upward revisions in inflation expectations...</p>\n\n<a href=\"https://seekingalpha.com/article/4739930-igib-banking-exposure-and-duration-concerns-under-trump\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4585","symbol_name":"ETF&股票定投概念","start_time":0,"source_url":"https://seekingalpha.com/article/4739930-igib-banking-exposure-and-duration-concerns-under-trump","article_id":"2486797009","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1934166657/image_1934166657.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2486797009","pubTimestamp":1732467138,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Historically low credit spreads make any credit risk uninteresting.Duration is also not favorable, with Trump's rhetoric and possible actions contributing to upward revisions in inflation expectations","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4585":"ETF&股票定投概念","IGIB":"iShares 5-10 Year Investment Grade Corporate Bond ETF","BK4588":"碎股"},"translate_title":"IGIB：特朗普领导下的银行业风险和久期担忧","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"IGIB":0.9},"content_text":"Historically low credit spreads make any credit risk uninteresting.Duration is also not favorable, with Trump's rhetoric and possible actions contributing to upward revisions in inflation expectations.We also don't particularly like taking the credit approach to banking right now, with deregulation also on the agenda.We are getting out of the way of IGIB.Wipada Wipawin  The iShares 5-10 Year Investment Grade Corporate Bond ETF (NASDAQ:IGIB) is an ETF we'd avoid. Credit spreads are at historical lows, so we don't like the value possibilities here with the bet on credit spreads. The bigger matter is Trump. Just the risk that he puts tariffs is going to influence the consumer in such a way that inflation will be more likely to stay. The more inflation lingers, the more it gets in the economic woodwork and the more difficult it is to get rid of. While in our last coverage of IGIB we were focused on the headline data and perpetuation risk, and while there have been rate cuts since then, Trump is a new risk. Even his rhetoric leading up to his election, even if he doesn't follow through with his policies like tariffs, risks perpetuating inflation further than it would have before. IGIB Breakdown Credit Ratings (iShares.com) Starting on the less interesting point of the credit ratings. There is a relatively even distribution between A and BBB rated bonds. Taking BBB credit spreads, although the conclusion will be the same for the A credit spreads as well, we can see that credit spreads are at historically low levels. They are lower than even in the 2017-2018 market, which was one of the most accommodating \"new normal\" markets since the global financial crisis in 2008. BBB Credit Spreds (FRED) We are not comfortable with the level of demand for non-zero risk credit in the US, as we feel that it cannot gel with an economic environment that is still affected by inflation, much higher than what it was in 2017 for example, which is a fundamentally unpredictable and disturbing feature in an economy. While the consumer environment is still somewhat strong, it is softening YoY, and some markets are seeing downtrading in general consumer industries. As a note, Trump will likely drive deregulation in his administration, likely through the government efficiency initiatives. Banking shareholders will likely be big beneficiaries, but not banking credit, since there'll be more space for leverage and risk taking. The US version of the Basel initiatives were already only able to come through into the industry in a watered-down form. With a significant sectoral skew towards banking in the IGIB (24%), we think that credit risks should be considered at least a little heightened just because of that. Related to possible economic issues, the bigger issue with the IGIB is the substantial duration of 6 years, meaning sensitivity to upward translations of the yield curve, which the market has been experiencing periodically with every disappointing data readout over the last few years. We are bearish on duration for several quite obvious reasons, which the market has been getting repeatedly wrong because it is ignoring the risk of second order and high leverage effects. The yield curve has been translated downwards after the second cut, but already in a month it has come up, particularly in the mid-term of around 4-6 year maturities. We think the second cut was more of a statement about the Fed independence than a real data-driven decision. Inflation readings are up MoM, and inflation expectations are up as well, which is very concerning. We think the inflationary nature of tariffs in Trump's rhetoric, and the risk of supply issues in the event of a Chinese trade war, have caused consumers to be wary of future inflation. He doesn't even need to follow through, as the damage has already been done due to anchoring risks. Inflation expectations beget inflation, which beget higher inflation expectations. It is the most powerful, causative and pernicious force with vicious flywheel risks for inflation. Rising inflation expectations are a major concern and clearly raise the risks of higher longer-term inflation rates, which are still quite far from comfortable levels on a headline basis. Comps are also getting less favorable with commodity deflation further in the rearview. CPI readings are likely to continue to look worse. Bottom Line  If inflation doesn't go down to a comfortable level, the Fed may even have to act with a future hike. Even without a hike, we may have a higher interest rate for longer than the market currently expects, which would cause upward translations in the yield curve and injure duration bets like IGIB. We don't like the generally small credit premium on any non-zero risk credit asset in the current market, and we are also not especially pleased about IGIB's specific tilt to banking, where incrementally risks are growing in our opinion. We don't want to get involved here.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.2","shortVersion":"4.29.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2486797009"}