SPLB: Short And Long-Term Rates Rising In A Crisis-Led Yield Curve
The State Street SPDR Portfolio Long Term Corp Bd ETF targets investment-grade, long-duration corporate bonds. Duration is an issue for this ETF as the crisis concerns both long-term and short-term YTMs, all going up due to a combination of terminal inflation assumptions and spreads. Our primary note is that the impact on oil logistics could be longer lasting than the war, which itself could be longer lasting than expected.
SPLB: Don't Bet On The World's Structure 20 Years Out
Demographics (outside of immigration considerations) aren't a direct concern for US productivity and therefore long-term benchmark rates. But it has been suggested the demographic effects in portfolio allocation may see a net retail divestment from long-term fixed income as the soon-to-retire sell long-dated bonds. We see more risks in the ability for the US to maintain its USD reserve currency status over significant horizons of the long-dated SPLB, at 20+ years.
SPLB: The Worst Of Both Worlds From A Macro Stand-Point
SPLB offers diversified exposure to long-term US corporate bonds, with a focus on A and BBB credits and a 12.5-year duration. Current BBB spreads are near historic lows, limiting upside potential and increasing downside risk if spreads widen or rates rise. The fund's performance relies heavily on long-term interest rates and credit spreads, both of which present unfavorable risk/reward at present.
