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Historical High-Yield Corp Fund yields/market timing

Posted: Mon Jan 21, 2008 5:48 pm
by rockH
Does anyone know where I can find historical Vanguard fund Yield-to-Maturity information? The same yield info that they post daily on their website. Thanks in advance for any assistance. Here's why I'm asking:

I sold the Vanguard High-Yield Corp Fund in Feb 2007 when its Yield-to-maturity was 7.3% and bought Intermediate-Term Treasury Fund at a yield of 4.9%. The spread between the two funds at that time was 2.4%. I assume that this was close to a historical low, although I don’t have specific data. Generally high yield and other corporate bond spreads over comparable Treasuries were near historic lows in the first half of 2007.

The Vang HY Corp spread over Vang Int-Term Treasury has since widened to 4.96%, and I am now trying to figure out when to get back in to high yield, although I suspect it may still be too early as the credit market fallout probably isn’t done yet.

I’m trying to calculate historical levels of the above yield spread (Vang HY Corp. vs. Vang Int-Term Treasury) to determine the levels where it peaked in previous cycles. Other high yield bond indexes (Lehman, Merrill) peaked in 2002 – I think in September.

I don’t believe that its possible to time the equity markets, however I think the story might be different with corporate bond spreads. The old high yield market axiom is: When spreads are high, time to buy. When spreads are low, time to go.

RockH

Posted: Mon Jan 21, 2008 6:40 pm
by larryswedroe
Might want to keep following in mind as you consider your trade/

remember that the high or low spreads pretty much just reflect equity type risks. So if spreads are wide that means the equity portion of the hybrid that is junk is providing high risk premium. And also the call risk is greater the higher the spread. Reason being that even if rates don't fall but spreads do you will get called early, so you don't get the high spread for the full period.

You can replicate junk with mix of Treasuries or investment grade corporates and some equities---that is pretty much all you are doing when buying junk. Good example is that the ERP has now widened as has the value premium./

The one thing I would add is that the liquidity premium in junk has widened for sure. But again if it narrows you will get calls occurring.