Market Vectors’ fixed income portfolio manager Fran Rodilosso today commented on the Federal Reserve’s Federal Open Market Committee’s (“FOMC”) decision to proceed with Quantitative Easing (“QE3”) and the effects that the newly announced plan may have on the fixed income market.
“The FOMC has kept the Central Bank winning streak alive with its announcements today,” said Rodilosso. “Bernanke’s announcement did not exceed the market expectations; in fact, the scope of additional purchases does not include Treasuries as some analysts had expected. However, we are confident that the prospect of low interest rates into mid-2015, which is way beyond the investment horizon of the vast majority of investment managers, may help to sustain demand for risky assets, including high yield debt.”
Rodilosso went on to add, “There are definitely sobering aspects to this story as the very need for this monetary stance is obviously a symptom of a very sick economy, especially in the area of job creation. And it is jobs, rather than the very remote prospects of another housing boom or the wealth effect of rising equity prices, that will get U.S. consumers driving the U.S. economy back to a more acceptable level of growth. But I still see corporate debt, on a global basis, as a relatively attractive alternative to Treasuries, European sovereign debt and even emerging markets hard currency sovereign debt.”
“Yields are indeed low on a historic basis,” he added. “But credit spreads are nowhere near their pre-crisis low and are, in fact, at pretty reasonable levels from an historic perspective given the low default rates the market has been experiencing.”
Mr. Rodilosso has more than 20 years of senior level experience in emerging markets, high-yield debt research and portfolio management. He currently manages seven Market Vectors fixed income ETFs, Fallen Angel High Yield Bond ETF (NYSE Arca: ANGL), International High Yield Bond ETF (NYSE Arca: IHY), Emerging Markets High Yield Bond ETF (NYSE Arca: HYEM), Emerging Markets Local Currency Bond ETF (NYSE Arca: EMLC), LatAm Aggregate Bond ETF (NYSE Arca: BONO), Renminbi Bond ETF (NYSE Arca: CHLC) and Investment Grade Floating Rate ETF (NYSE Arca: FLTR).
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About Market Vectors ETFs
Market Vectors exchange-traded products have been offered since 2006 and span many asset classes, including equities, fixed income (municipal and international bonds) and currency markets. The Market Vectors family currently totals $23.6 billion in assets under management, making it the fifth largest ETP family in the U.S. and eighth largest worldwide as of June 30, 2012.
Market Vectors ETFs are sponsored by Van Eck Global. Founded in 1955, Van Eck Global was among the first U.S. money managers helping investors achieve greater diversification through global investing. Today, the firm continues this tradition by offering innovative, actively managed investment choices in hard assets, emerging markets, precious metals including gold, and other alternative asset classes. Van Eck Global has offices around the world and manages approximately $32 billion in investor assets as of June 30, 2012.
There are risks involved with investing in ETFs, including possible loss of money. Shares are not actively managed and are subject to risks similar to those of stocks, including those regarding short selling and margin maintenance requirements. Ordinary brokerage commissions apply. Debt securities carry interest rate and credit risk. Interest rate risk refers to the risk that bond prices generally fall as interest rates rise and vice versa. Credit risk is the risk of loss on an investment due to the deterioration of an issuer's financial health. The Funds' underlying securities may be subject to call risk, which may result in the Funds having to reinvest the proceeds at lower interest rates, resulting in a decline in the Funds' income.
The Funds, as they invest in high yield securities, may also be subject to a greater risk of loss of income and principal than higher rated securities. Investments in emerging markets securities are subject to elevated risks which include, among others, expropriation, confiscatory taxation, issues with repatriation of investment income, limitations of foreign ownership, political instability, armed conflict and social instability. The prices of high yield securities are likely to be more sensitive to adverse economic changes or individual issuer developments than higher rated securities. The secondary market for high yield securities may be less liquid than the market for higher quality securities and, as such, may have an adverse effect of market prices of certain securities. As the Fund may invest in securities denominated in foreign currencies and some of the income received by the Fund will be in foreign currency, changes in currency exchange rates may negatively impact the Fund’s return. Investments in emerging markets securities are subject to elevated risks which include, among others, expropriation, confiscatory taxation, issues with repatriation of investment income, limitations of foreign ownership, political instability, armed conflict and social instability. Investors should be willing to accept a high degree of volatility and the potential of significant loss. For a more complete description of these and other risks, please refer to the Fund’s prospectus and summary prospectus. The Fund may loan its securities, which may subject it to additional credit and counterparty risk.
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