TWO INCOME CHARTS
The first is a chart of four closed-end non-US bond funds: Alliance Bernstein Global High Income (AWF), Templeton Global Income (GIM), Aberdeen Asia-Pacific Income, and Templeton Emerging Markets Income (TEI). AWF As result of a merger several years ago, AWF is partly non-US and partly US bonds, primarily corporate high yield. The chart is from the first day of trading (per FT). GIM is primarily sovereign bonds of both advanced and emerging market countries. FAX is in Australian state bonds and Korean sovereigns as well as corporate bonds of Asia and international agencies. TEI is 2/3 in emerging market sovereigns and 1/3 emerging market corporates. I own all of these funds. PTTRX and LSBDX are included for comparison's sake. I also own these funds.
The second chart shows three income mutual funds, PTTRX, LSBDX, and Pimco Income Fund (PIMIX) which I own, and three to which I am gradually migrating to defend against rising interest rates. I am doing this because are rates are so very low but also because of increasing evidence that the FED is beginning to unwind some of QE1 and QE2. They are restarting reverse repo auctions, and have hinted about selling some "toxic assets" and not continuing QE2 beyond June 30. Many have cautioned this for equities in the second half of 2011, but longer Treasurys would likely be hit harder and effect a ripple in the corporate bond world.
Since this idea is still conjectural, I am not rushing a change but will do so more or less on a regular weekly schedule over the next few months. More on this another time.
I have mentioned Fidelity Floating Rate High Income Fund (FFRHX) and its PIMCO cousin (PFIIX). I do not plan to overweigh these as they have some risks (credit risk as well as pre-payment or refinancing risk).
I have mentioned the PIMCO Short Term Fund (PTSHX) with an effective bond duration of about 9-10 months. This pays only about 1% but that's a lot higher than a money market fund. Another destination for migration is the PIMCO Unconstrained Bond Fund (PFIUX). Unconstrained in this context means discretionary or not tied to a mandated benchmark. PFIUX is alowed to vary its average bond duration from +8.00 to -3.00. What's a -3.00 duration? Basically at that point they would be short enough longer duration bonds to make the whole portfolio modestly net short. Theoretically, in my own view, this would mean if rates went up 1%, the fund could go up 3%. So in a sense PFIUX is a variable rate fund. It is currently paying about 3% with a duration of 1.25. If you check duration on this fund, be sure to note when then data were collected, as it can change over a short period of time as the managers see fit. I think this is a sleeper fund. One of our long time commenters here has owned it for a while, and I will soon own it.
(Note that the PIMCO, Loomis Sayles, and Fidelity funds in these two charts are available in several classes with different minimum investment requirements and annual charges.)