Tuesday, June 25, 2013

The Interest Rate Shock:

The “negative key reversal” such as occurred last May 22 has got a lot of play in the financial media. A negative key reversal day is a down day on a stock or an index that has two conditions. The price rises inter-day to trade above the pervious day’s high and then reverses downward to trade lower than the previous day’s low. A negative key reversal day is touted to be rare and very deadly. Some technical analysts claim this to be a rare event – it is actually occurs with great frequency with little consequence. For example the S&P500 stock index over the last six months had negative key reversal days on Feb 7, 2013. Feb 25, 2013, May 1, 2013 and May 22, 2013. We all managed to live through these nasty signals.

More notable is the recent bounce in interest rates. Last Friday June 21, 2013 a number of interest sensitive ETFs sold down to new 52-week lows. The list below is rather overwhelming. Perhaps the bond market is now “the sell of a generation.”

Name                                                  Security           Symbol
BMO Aggregate Bond Index               CAD unit          ZAG
BMO Emerging Markets Bond            CAD unit          ZEF
BMO Long Corporate Bond                CAD unit          ZLC
BMO Long Fed Bd Index ETF             CAD unit          ZFL
BMO Mid Corporate Bond                   CAD unit          ZCM
BMO Mid Fed Bd Index ETF               CAD unit          ZFM
BMO M-T US IG Corp Bd Hdg            CAD unit          ZMU
BMO M-T US IG Corp Bond                USD unit          ZIC.U
BMO Real Return Bd Index                CAD unit          ZRR
BMO S&P/TSX Laddered Pfd             CAD unit          ZPR
BMO Short Corporate Bond               CAD unit          ZCS
BMO Short Provincial Bond                CAD unit          ZPS
BMO SP/TSX E W Glb Bs Met           CAD unit          ZMT
BMO US Dividend ETF                       USD unit          ZDY.U
iShares 1-10 Yr Ld Cp Bd                   com unit          CBH
iShares 1-5 Year Ld Cp Bd                 com unit          CBO
iShares 1-5 Year Ld Gv Bd                 com unit          CLF
iShares Advantaged Cdn Bd             com unit          CAB
iShares Alter Comp                            Prtfl unit           XAL
iShares BRIC Index Fund                   com unit          CBQ
iShares DEX All Corp Bond                index unit         XCB
iShares DEX Govt Bd                         index unit         XGB
iShares DEX HYBrid Bond                 index unit         XHB
iShares DEX Long Term Bd               index unit         XLB
iShares DEX Real Ret Bd                  index unit         XRB
iShares DEX Short Term Bd             index unit         XSB
iShares DEX Universe Bond             index unit         XBB
iShares Dvrsfd Mnthly                         index unit         XTR
iShares S&P Latin Amer 40                unit                  XLA
iShares S&P/TSX Cap Mat                 index unit         XMA
iShares S&P/TSX Cap REIT             index unit         XRE
iShares S&P/TSX CDN Pfd                com unit          CPD
iShares S&P/TSX Glbl Gld                 index unit         XGD
iShares US IG Corp Bond                   unit                  XIG
iShrs Adv US High Yld Bd                   com unit          CHB
iShrs DEX ST Cp +                            Mpl Bd t           XSH
iShrs JPM USD Emrg Mrk Bd             unit                  XEB
iShrs S&P/TSX N A Pfd Stk    I           ndex unit          XPF

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