The bond market can provide valuable insights into where the equity markets may be more broadly headed. With credit spreads remaining historically tight, the bond market is signaling a rare degree of optimism. This positivity is surprising given the uncertainty associated with looming political fights over the debt ceiling, tax reform (or cuts), the unwinding of the Federal Reserve’s balance sheet, and heightened geopolitical tensions across the globe. Not everyone is optimistic, however. Many are rejecting the signals from the bond market and are predicting some form of a correction though it is improbable to pinpoint the timing and severity of a pullback, or if one occurs at all.

While markets may not yet be reflecting the risks associated with these potential upcoming political fights, markets may get spooked as we get closer to the deadlines. There are some signs this is already happening in the treasury market: T-bills maturing around the expected dates of various political showdowns are trading at higher levels than longer-dated T-bills, indicating that the market is preparing for a risk-off environment during these political fights.

Yet with credit spreads tightening this year, lower quality bonds like High Yield and Preferreds, have been among the best performers:

Asset Class Returns

In addition, the mild decrease in 10 year treasury yields has favored fixed rate instruments over floating rate.

Fixed vs. Floating Rate Preferreds


10 Year Treasury Yield


Related ETFs

Global X SuperIncome Preferred ETF (SPFF)

The Global X SuperIncome™ Preferred ETF (SPFF) invests in 50 of the highest yielding preferred stocks in North America

Category: Commentary

Topics: Macroeconomic

Carefully consider the Funds’ investment objectives, risk factors, charges, and expenses before investing. This and additional information can be found in the Funds’ summary and full prospectuses, which may be obtained by calling 1-888-GX-FUND-1 (1-888-493-8631), or by visiting Read the prospectus carefully before investing

Shares are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. Indices are unmanaged and do not include the effect of fees, expenses or sales charges. One cannot invest directly in an index.

Global X Management Company LLC serves as an advisor to Global X Funds. The Funds are distributed by SEI Investments Distribution Co. (SIDCO), which is not affiliated with Global X Management Company LLC. Global X Funds are not sponsored, endorsed, issued, sold or promoted by Standard & Poors nor does this companymake any representations regarding the advisability of investing in the Global X Funds. Neither SIDCO nor Global X is affiliated with Standard & Poors.

Investing involves risk, including the possible loss of principal. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. Preferred stock is subject to many of the risks associated with debt securities, including interest rate risk. In addition, preferred stock may not pay a dividend, an issuer may suspend payment of dividends on preferred stock at any time, and in certain situations, an issuer may call or redeem its preferred stock or convert it to common stock. High yielding stocks are often speculative, high-risk investments. These companies can be paying out more than they can support and may reduce their dividends or stop paying dividends at any time, which could have a material adverse effect on the stock price of these companies and the Fund’s performance. SPFF is non-diversified.