It pays to stay diversified among many asset classes, including bonds. Today, I’m seeing signs of U.S. Treasurys strengthening relative to corporate bonds (and probably in absolute terms as well). We can find out which one is likely to outperform the other by looking at a relative strength chart of two ETFs: the iShares Barclays 20+ Yr Treas.Bond (ETF)(NYSEARCA:TLT) and the iShares iBoxx $ High Yid Corp Bond (ETF)(NYSEARCA:HYG).
The Barclays Treasurys ETF tracks a group of U.S. Treasury bonds with remaining maturities greater than 20 years.
The iBoxx Corporate Bond ETF tracks a group of U.S. high-yield corporate bonds.
We’ll start our analysis by comparing the two ETFs since April of 2007.
But for most of 2014, both have been trading higher (along with the stock market), as U.S. assets in general is where investors want to be.
Overall, U.S. bond yields have been declining as they fall in line with the low rates of other developed countries.
But if we had used a relative strength study at the start of the year, it would have been easy to