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DJ Global Yield & Domestic Bonds – Growth & Inflation
April 25, 2017

The Dow Jones Global Yield Index (DJGYLDT) and the Barclays U.S. Aggregate Bond Index (Domestic Bonds) have returned 151% and 8.7%, respectively, since December 31, 2005 (Figure 1). DJGYLDT bested domestic bonds primarily because U.S. Treasury bonds and U.S. corporate bonds make up around 35% and 25-28% of the index while DJGYLDT’s allocations to domestic bonds has been 15-17%. DJGYLDT weights its portfolio to the highest yielding global bonds and stocks with 40% held in global bonds and 60% in global stocks.

Much like commodities, DJGYLDT performs best when inflation is rising or stable while the 12-month rate of change on the Consumer Price Index (CPI) remains above 2.5% and when annualized real gross domestic product (NGDP) remains above 4%. The global yield index is impacted more by the price direction of oil than it is by gold (Figure 1). Domestic bonds underperform allocations when growth strengthens and inflation rises. DJGYLDT’s five sub-indexes enabled it to best domestic bonds when these trends unfolded (Figure 2).

InFocus Highlights: (Figures 1-2 begin Jan 1, 2006, Figure 3 begins Oct 24, 2015. They end April 24, 2017.)

  • DJGYLDT’s 52-week correlation to NGDP weakens as oil (WTIC) rises and strengthens as the price of gold declines (Figure 1).
  • DJGYLDT’s technical trend is bullish over the next 3- to 6-months (Intermediate-Term, Figure 3).

Figure 1. Global Yield – Oil & Gold

Figure 2. DJ Global Yield and Its Sub–Indexes – Last 12 months

Figure 3. DJ Global Yield’s Intermediate–Term Price Trend – Bullish

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The contents are not an offer to buy or sell any security or to participate in any trading strategy. Arrow Insights and its affiliates, or its employees not involved, may have investments in securities or derivatives of securities of companies mentioned in this report, and may trade them in ways different from those discussed in this report.

Arrow Insights and its affiliate companies conduct business related to securities covered in its research reports, which may include market making and specialized trading, risk arbitrage and other proprietary trading, fund management, and investment services. Arrow Insights makes every effort to use reliable, comprehensive information, but we make no representation that it is accurate or complete. Opinions or information in this report are subject to change without notice.

Reports prepared by Arrow Insights are based on public information and may or may not include the opinion(s) of the author. Facts and views presented in this report have not been reviewed by, and may not reflect information known to, professionals affiliated with Arrow Insights.

Past performance is not necessarily a guide to future performance. Estimates of future performance are based on assumptions that may not be realized.



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