Bill Gross says “The age of inflation is here”….High-Yield Municipal Bonds….and more!

Best of the Bond Market for September 5th, 2012

PIMCO: Bill Gross’s monthly investment commentary is out – Last month’s “dying cult of equity” Investment Outlook elicited a lot of excitement, but somehow failed to impress readers with its main point: Returns from both stocks and bonds will be stunted.

Bloomberg: High-yield municipal debt proves to be the “safest“. – City and state securities rated below investment grade are beating the market on an absolute basis and when adjusted for volatility, according to data compiled by Standard & Poor’s and Bloomberg. It’s a reversal of 2011, when the bonds proved the riskiest.

Public Investor: Pension bonds – bad idea that won’t die. – Some states and cities are increasing their use of borrowing to finance pension fund shortfalls, even though the practice has been disastrous for most governments who have used it in the past.

Sun Sentinel: – Fort Lauderdale commission to vote Wednesday on pension bonds. – A divided commission on Wednesday is expected to approve borrowing up to $340 million to reduce the city’s pension liabilities, a move officials say will free up money in the city’s operating budget to cover other expenses. The city hopes to save millions of dollars a year over the 20-year life of the pension obligation bonds, but critics say the bonds are being used to gamble in the stock market and on other financial investments.

American Banker:Wells Fargo likes to live dangerously. – Wells Fargo & Co. takes greater risk on its investments in stocks and bonds than competing lenders, according to a CreditSights Inc. report.

LeveragedLoan: Leveraged loans are on a roll – up 1.12% in August and 6.94% year to date

New York Times: Lehman Brothers sold Stockton CA. dubious bond deal. – Jeffrey A. Michael, a finance professor in Stockton, CA., took a hard look at his city’s bankruptcy this summer and thought he saw a smoking gun: After reviewing an analysis of the bond deal and watching a recording of the Stockton City Council meeting where Lehman bankers pitched the deal, Mr. Michael concluded that “Stockton is entitled to some relief, due to deceptive and misleading sales practices that understated the risk.”

Learn Bonds:50 shades of gray for Penthouse bond holders. – Penthouse bites off more than it can chew with $500 million bond issue. Standard & Poor’s have downgraded Penthouse bonds to CCC, meaning they think it’s unlikely the interest will continue to be paid.

Bloomberg:Dallas Cowboy’s; you’re welcome. – The Dallas Cowboy’s new stadium was paid for by using muni bonds issued for sports structures. It’s one of 21 NFL stadiums built in the last 25 years using tax free public borrowing. It’s estimated such schemes will cost the treasury $4 billion throughout their lifetime.

Bond Buyer: Michigan locals are seeing more stability. – A growing number of local governments in Michigan are beginning to see glimmers of fiscal stability for the first time in years, according to a new report by the University of Michigan.

WSJ: California muni bond investors like school bonds – California school bonds are drawing investors because the school districts, unlike municipalities, are considered to be the responsibility of the state. Since 1991, when the California Legislature created a more rigorous oversight regimen for school districts, none have defaulted on bonds, market observers said.

Reuters:U.S. corporate bond new issues. – The following are lists of upcoming high-grade and high-yield corporate bond offerings in the United States. The information was gathered from Thomson Reuters U.S. new issues team, and other market sources.


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