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OPEC meeting offering false hope?

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ETF Securities Research - OPEC meeting offering false hope? The CAD and NOK look set to resume their decline against the US Dollar.

ETF Securities Research – OPEC meeting offering false hope?

Highlights

  • Diplomatic efforts by Saudi Arabia and Russia prompt hopes for a joint production agreement at the upcoming meeting.
  • Any agreement is likely to be superficial and fail to accelerate rebalancing of the global oil market.
  • The CAD and NOK look set to resume their decline against the US Dollar.

Diplomatic attempts lift oil

OPEC returned to centre stage last Tuesday as news of diplomatic efforts made by Saudi Arabia and Russia to implement a production agreement sparked a 5.7% rally in crude benchmarks. The upcoming OPEC meeting, scheduled for the 30th November, is highly anticipated as it could result in a coordinated production cut by the cartel (as agreed earlier in the year in Algiers) and is therefore a pivotal event in determining the future of both oil prices and associated currencies (CAD & NOK). Historically, OPEC members have been poor at keeping to production limits but on this particular occasion obstacles are even larger as many of the member nations are under considerable financial and political strain. Therefore, it is our view that risks to oil prices remain firmly skewed to the downside and it is increasingly likely that the USD/CAD and USD/NOK will continue on their current upward trend to the end of the year.

Deal or no deal

The preliminary agreement at Algiers was for the oil cartel to reduce production to between 32.5 and 33 million barrels per day (mbpd), with Nigeria, Libya and Venezuela exempt from any arrangement. This would translate into a reduction of oil output of 0.6-1.1mbpd from October levels which, according to the International Energy Agency (IEA), would help balance the global oil market earlier than their current estimate of Q3 2017. In theory this is a very bullish prospect for oil prices but in practice imposing a coordinated production limit is complicated; particularly when the aim is to also coerce the likes of key non-OPEC oil producers like Russia to participate.

etfs1

(Click to enlarge)

Firstly, within OPEC, certain members have already started to show signs of foul play, either by demanding exemption or by inflating reported output figures with the hope of building a safety margin into any agreement. For instance, officials from Iraq have clearly stated that they do not intend to reduce production or participate in any agreement, citing their war on the Islamic State (ISIS) as sufficient reason for exemption. Also, in the latest monthly OPEC publication, the difference in reported output between secondary sources and direct sources totalled a positive 0.54mbpd for Iran and Iraq alone, a huge difference. For those nations that have been offered some form of formal exemption or are seeking it, namely Iraq, Nigeria and Libya, increases in
production has been sharp in recent months (see Figure 1) which increases the burden on Saudi Arabia to curb output. Outside of OPEC group, the higher range of oil prices in the second half of this year has caused the number of active oil rigs in the US to increase by 40% since June and production has started to climb from an October low of 8.45mbpd. All these factors mean that curbing output meaningfully is going to be difficult for OPEC and so any deal that may emerge from the meeting could merely offer false hope. Potential market optimism that results and spurs a rally in oil prices and oil linked currencies is likely to be short lived and could be seen as an opportunity to establish short positions.

Resistance to prove weak

Since the surprise Trump victory, the US Dollar has rallied strongly against the CAD and the NOK to trade at near short term resistance levels. The USD/CAD is retreating from 1.357, a 50% retracement level from the steep decline earlier in the year, while the USD/NOK is near the top of its recent 8-8.5 range. However, we feel as though both these pairs are on strong upward trends and a failure to reach an agreement in Vienna has potential to trigger moves to the upside beyond these resistance levels.

Investors wishing to express the investment views outlined above may consider using the following ETF Securities ETPs:

Currency ETPs

EUR Base

ETFS Long CAD Short EUR (ECAD)
ETFS Short CAD Long EUR (CADE)
ETFS Long NOK Short EUR (EUNO)
ETFS Short NOK Long EUR (NOEU)

GBP Base

ETFS Long CAD Short GBP (GBCA)
ETFS Short CAD Long GBP (CAGB)
ETFS Long NOK Short GBP (GBNO)
ETFS Short NOK Long GBP (NOGB)

USD Base

ETFS Long CAD Short USD (LCAD)
ETFS Short CAD Long USD (SCAD)
ETFS Long NOK Short USD (LNOK)
ETFS Short NOK Long USD (SNOK)

3x

ETFS 3x Long CAD Short EUR (ECA3)
ETFS 3x Short CAD Long EUR (CAE3)

5x

ETFS 5x Long CAD Short EUR (ECA5)
ETFS 5x Short CAD Long EUR (CAE5)

Currency Baskets

ETFS Bullish USD vs Commodity Currency Basket Securities (SCOM)
ETFS Bearish USD vs Commodity Currency Basket Securities (LCOM)

*All figures quoted are sourced from Bloomberg unless stated otherwise.

Important Information

This communication has been provided by ETF Securities (UK) Limited (“ETFS UK”) which is authorised and regulated by the United Kingdom Financial Conduct Authority (the “FCA”). The products discussed in this document are issued by ETFS Foreign Exchange Limited (“FXL”). FXL is regulated by the Jersey Financial Services Commission.

This communication is only targeted at professional investors. In Switzerland, this communication is only targeted at Regulated Qualified Investors.

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De bästa lågvolatilitets ETFer på marknaden

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Aktier med låg volatilitet tenderar att ge en överavkastning jämfört med den risk som tas. Denna forskningsbaserade observation kallas lågvolatilitetsfaktorn vilket gynnat uppkomsten av lågvolatilitets ETFer.

Aktier med låg volatilitet tenderar att ge en överavkastning jämfört med den risk som tas. Denna forskningsbaserade observation kallas lågvolatilitetsfaktorn vilket gynnat uppkomsten av lågvolatilitets ETFer.

Det finns olika möjliga förklaringar till detta: Till exempel kan aktier med låg volatilitet uppfattas som mindre givande av investerare då de är förknippade med mindre risk. En annan teori tyder på att investerare generellt överskattar sin förmåga att prognostisera. För särskilt volatila aktier finns en större oenighet mellan investerare, vilket bör leda till högre volatilitet och lägre avkastning.

Denna faktorstrategi kan även implementeras med hjälp av ett index. I den här investeringsguiden hittar du alla tillgängliga globala ETF:er med låg volatilitet. För närvarande finns det fem index som spåras av åtta olika ETFer tillgängliga. Den årliga förvaltningskostnaden för dessa börshandlade fonder ligger på mellan 0,25 och 0,30 procent.

En jämförelse av olika lågvolatilitets ETFer

Förutom avkastning finns det ytterligare viktiga faktorer att tänka på när du väljer lågvolatilitets-ETFer. För att ge ett bra beslutsunderlag hittar du en lista över olika lågvolatilitets -ETFer med information om kortnamn, kostnad, utdelningspolicy, fondens hemvist och replikeringsmetod.

För ytterligare information om respektive börshandlad fond, klicka på kortnamnet i tabellen nedan.

Namn
ISIN
KortnamnAvgift %Utdelnings-
policy
HemvistReplikerings-
metod
iShares Edge MSCI World Minimum Volatility UCITS ETF USD (Acc)
IE00B8FHGS14
IQQ00.30% p.a.AckumulerandeIrlandOptimerad sampling
iShares Edge MSCI World Minimum Volatility ESG UCITS ETF (Acc)
IE00BKVL7778
MVEW0.30% p.a.AckumulerandeIrlandOptimerad sampling
Xtrackers MSCI World Minimum Volatility UCITS ETF 1C
IE00BL25JN58
XDEB0.25% p.a.AckumulerandeIrlandOptimerad sampling
CSIF (IE) MSCI World ESG Leaders Minimum Volatility Blue UCITS ETF B USD
IE00BMDX0M10
CSY90.25% p.a.AckumulerandeIrlandFysisk replikering
iShares Edge MSCI World Minimum Volatility UCITS ETF USD (Dist)
IE00BMCZLJ20
UEEH0.30% p.a.UtdelandeIrlandOptimerad sampling
Xtrackers MSCI World Minimum Volatility ESG UCITS ETF 1C
IE0008YN0OY8
XWEB0.25% p.a.AckumulerandeIrlandFysisk replikering
Invesco Quantitative Strategies Global Equity Low Volatility Low Carbon UCITS ETF Acc
IE000N42HDP2
LVLC0.25% p.a.AckumulerandeIrlandFysisk replikering
XACT Norden Högutdelande (UCITS ETF)
SE0009778954
XACTHDIV0,3%UtdelandeSverigeFysisk replikering

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WMMS ETF ETF en globalfond för värdeaktier

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Amundi MSCI World IMI Value Screened Factor UCITS ETF UCITS ETF Acc (WMMS ETF) med ISIN IE000AZV0AS3, försöker spåra MSCI World IMI Value Select ESG Low Carbon Target-index. MSCI World IMI Value Select ESG Low Carbon Target-index spårar aktier från utvecklade länder över hela världen som väljs ut enligt värdefaktorstrategin och ESG-kriterier (miljö, social och företagsstyrning). Indexet har som mål att minska utsläppen av växthusgaser och ett förbättrat ESG-poäng jämfört med jämförelseindex. Jämförelseindexet är MSCI World IMI.

Amundi MSCI World IMI Value Screened Factor UCITS ETF UCITS ETF Acc (WMMS ETF) med ISIN IE000AZV0AS3, försöker spåra MSCI World IMI Value Select ESG Low Carbon Target-index. MSCI World IMI Value Select ESG Low Carbon Target-index spårar aktier från utvecklade länder över hela världen som väljs ut enligt värdefaktorstrategin och ESG-kriterier (miljö, social och företagsstyrning). Indexet har som mål att minska utsläppen av växthusgaser och ett förbättrat ESG-poäng jämfört med jämförelseindex. Jämförelseindexet är MSCI World IMI.

Den börshandlade fondens TER (total cost ratio) uppgår till 0,25 % p.a. Amundi MSCI World IMI Value Screened Factor UCITS ETF UCITS ETF Acc är den enda ETF som följer MSCI World IMI Value Select ESG Low Carbon Target-index. ETFen replikerar det underliggande indexets prestanda genom fullständig replikering (köper alla indexbeståndsdelar). Utdelningarna i ETF:n ackumuleras och återinvesteras.

Denna ETF lanserades den 30 oktober 2024 och har sin hemvist i Irland.

Investeringsmål

Amundi MSCI World IMI Value Screened Factor UCITS ETF Acc försöker replikera, så nära som möjligt, oavsett om trenden är stigande eller fallande, resultatet för MSCI World IMI Value Select ESG Low Carbon Target Index (”Indexet”). Delfondens mål är att uppnå en tracking error-nivå för delfonden och dess index som normalt inte överstiger 1 %

Handla WMMS ETF

Amundi MSCI World IMI Value Screened Factor UCITS ETF UCITS ETF Acc (WMMS ETF) är en europeisk börshandlad fond. Denna fond handlas på Deutsche Boerse Xetra.

Det betyder att det går att handla andelar i denna ETF genom de flesta svenska banker och Internetmäklare, till exempel DEGIRONordnet, Aktieinvest och Avanza.

Börsnoteringar

BörsValutaKortnamn
XETRAEURWMMS
XETRAGBPWMMT

Största innehav

Denna fond använder fysisk replikering för att spåra indexets prestanda.

NamnValutaVikt %Sektor
CISCO SYSTEMS INCUSD2.74 %Information Technology
INTL BUSINESS MACHINES CORPUSD2.66 %Information Technology
JOHNSON & JOHNSONUSD2.50 %Health Care
VERIZON COMMUNICATIONS INCUSD2.35 %Communication Services
COMCAST CORP-CLASS AUSD2.30 %Communication Services
AT&T INCUSD2.21 %Communication Services
APPLE INCUSD2.18 %Information Technology
MICROSOFT CORPUSD2.04 %Information Technology
NVIDIA CORPUSD1.90 %Information Technology
CITIGROUP INCUSD1.77 %Financials

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The Investment Case for TLT (Long-Dated Treasury Bonds)

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The iShares 20+ Year Treasury Bond ETF (TLT) holds US government bonds that mature in 20 years or more. Since peaking in March 2020 at $179.90 per share, TLT’s price is still down roughly 50%. Most of that drop happened as US inflation – and then interest rates – rose to multi-decade highs. But with inflation now below 3%, potential interest rate cuts ahead, and an interesting chart setup, the investment case for TLT could be building.

The iShares 20+ Year Treasury Bond ETF (TLT) holds US government bonds that mature in 20 years or more. Since peaking in March 2020 at $179.90 per share, TLT’s price is still down roughly 50%. Most of that drop happened as US inflation – and then interest rates – rose to multi-decade highs. But with inflation now below 3%, potential interest rate cuts ahead, and an interesting chart setup, the investment case for TLT could be building.

What is TLT?

The iShares 20+ Year Treasury Bond ETF (TLT) is an exchange-traded fund (ETF) that trades on the US stock market. The fund holds “long-dated” US government bonds with maturities of 20 years or more. By holding a basket of them, TLT reflects how investors generally value this part of the bond market.

Each bond in TLT is a 20-plus year loan to the US government. The investor lends money, and in return receives fixed interest payments (coupons) each year. The government sets the coupon rate when it issues (creates) a new bond, and that rate never changes. After issuance, the bond can trade on the bond market, where its price may move up or down.

What affects the value of long-dated US Treasury bonds (and TLT)?

All else being equal, long-dated Treasury bonds tend to be more volatile than shorter-dated ones. Interest rates and inflation expectations are the two main levers that can move their prices – and hence the price of TLT.

Interest rates: When rates rise, newly issued bonds pay higher coupons. Older bonds in TLT can then look relatively less attractive, so their prices may fall. When rates fall, it’s the opposite: new bonds pay lower coupons, so older bonds look “better” and may rise in price. Because TLT only holds long-dated bonds, its price tends to react more to interest rate changes than short-term bond funds. Rate shifts tend to have a bigger impact on long-dated bonds because their fixed coupons extend far into the future. Even a small change in yields can make those older coupons look much better – or much worse – for a very long time.

Inflation expectations: When investors expect higher inflation in the future, the fixed coupons (and principal) in TLT can look less valuable in today’s money. That perception can push bond prices down as investors sell bonds. And when investors think future inflation will be lower, the same coupons can look more valuable today, which may support bond prices. Because TLT’s bonds mature further into the future, inflation has more time to erode their interest and principal repayments. That’s why long-dated bonds are usually more sensitive to inflation than shorter-dated ones.

The chart below compares the price of TLT (orange) with US interest rates (black) and US inflation (blue). It’s not an exact science, but TLT has tended to move opposite to both of them since the ETF launched in 2003.

Other factors can also play a role. The US government regularly issues (creates) new bonds, and if supply goes up, prices can fall. On the demand side, big buyers like pension funds, insurance companies, or foreign central banks can move the market. Credit risk perception is also key. Investors usually see Treasuries as very low risk, but not “risk-free”. So if they lose confidence in the US government’s repayment ability, it could hurt bond prices.

The investment case for TLT today

We’ve explained how lower interest rates and lower inflation might be a better environment for long-dated US treasury bonds. As explained below, there are reasons to believe we could be moving into that environment now.

The US Federal Reserve (Fed) essentially has two jobs, and it’s a constant balancing act between the two:

  1. Keep inflation down (by raising interest rates to slow the economy).
  2. Keep employment high (by lowering interest rates to speed up the economy).

US inflation peaked above 9% in June 2022, and it’s been trending lower ever since. Inflation isn’t very low yet (2.9% CPI as of August) – but it’s low enough for the Fed to focus more on job number two. Factor in a slowing economy, and the Fed is more likely to cut interest rates from here to boost employment numbers.

The chart below shows the US unemployment rate in orange. It’s now at 4.3% (August) – the highest unemployment rate since November 2021. In the past, unemployment rose gradually at first, before eventually breaking much higher. If that pattern repeats, we could see a bigger spike in unemployment.

Not only is the unemployment rate rising, but the number of new job openings is dropping, too. US nonfarm payrolls (new jobs excluding farming, private households, non-profits, and the military) showed that the US economy added just 22,000 new jobs in August.

And to make matters worse, the government also revised its earlier estimates down. The adjustment meant the US added around 911,000 fewer jobs in the year through March 2025 than first reported.

AI could also factor into these numbers. After all, companies are rolling out AI tech to improve productivity – and that puts pressure on the “human” job market. AI can also make goods and services cheaper to produce, which is inherently disinflationary (the opposite of inflation).

This setup could give the Fed more ammo for bigger rate cuts in the future. Throw in lower inflation, and we could see a solid backdrop for TLT.

The technical picture for TLT

Not many assets are trading near 20-year lows. But as the chart below shows, TLT is trading near technical “support” from the early 2000s (orange). Also note that TLT recently broke above a downward sloping trendline that’s been in play since December 2021. This may signal that selling pressure is easing, and buyers are stepping in.

The chart below shows Bollinger Bands around TLT’s price. Here, the middle band is TLT’s 20-month average price, and each red or green candle represents one month of price movement for TLT.

The further the outer bands are from the middle band, the more volatile TLT’s price, according to the indicator. At this point, the Bollinger Bands are pinching together – a sign of relatively low volatility for TLT. Volatility tends to be “mean reverting” – meaning it usually cycles from periods of lower volatility to higher volatility. If the bands now start to widen, and the price trends higher, we could see a sustained rally for TLT.

The next chart zooms into the weekly timeframe, where each red or green candle represents one week of price movement for TLT. In this case, the Bollinger band width represents the volatility of TLT around its 20-week moving average. The blue line underneath it shows the width of the Bollinger Bands – lower is narrower, and less volatility.

Last month, the Bollinger Bands reached their narrowest level since September 2018. In other words, TLT’s volatility reached its lowest level in seven years, according to the indicator. Now notice how the bands started expanding this month – from that very low volatility base. This suggests TLT could see more volatility going into the end of 2025. Keep in mind that volatility is direction neutral.

Risks

The investment case for TLT depends heavily on inflation staying low and the Fed being willing to cut rates. If inflation rises again, TLT may fall further. Heavy government borrowing could also pressure Treasuries if investors demand more compensation to buy the debt. And if the economy holds up better than expected, the Fed might not need to cut rates.

How IncomeShares ties in

The IncomeShares 20+ Year Treasury Options ETP holds TLT and sells call options on it.

• Selling calls generates option premiums that aim to provide monthly income.

• Exposure to TLT keeps the ETP linked to bond price moves.

• If TLT rises too far, gains may be capped to the strike price.

• If TLT falls, the option income may help cushion part of the drop.

Key takeaways

• TLT holds US government bonds due in 20+ years, which are typically more sensitive to interest rates than short-term bonds.

• After years of losses, inflation is lower, yields are higher, and economic data points to a slowdown – but risks remain.

• The IncomeShares TLT Options ETP aims to generate monthly income by selling calls, while keeping some exposure to TLT.

Follow IncomeShares EU for more insights.

Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.

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