What is the current condition of bond ETFs and should they be part of the portfolio? To examine this question one method of analysis is to apply the Delta Factor. When I run a reversion-to-the-mean analysis on bonds, I use AGG as the reference or standard. For equity ETFs I use the VTSMX total stock index fund. In the following table each bond ETF is compared with the expectations for AGG, and the projections are not all that positive.
Look down the Delta column and you will see that nearly every bond ETF is projected to have a lower Future return vs. its Historical return over the last 34 months. The reason for not using 36 or 60 months is that some of the bonds do not have sufficient historical data. When I run a 60 month analysis the only thing that changes is that there are more sell signals in the Delta Factor column.
Frankly, the outlook for bonds is not all that great. About the only reason I can see for holding bonds at this time is to lower portfolio volatility. I'm more inclined to seek income elsewhere and use the ITA Risk Reduction (ITARR) model to temper portfolio risk.