Best of the Bond Market for September 28th, 2012
FT: – Fourfold increase in junk bond issuance. – Average coupons on corporate bonds fell to all-time lows in the third quarter, prompting non investment-grade companies across the world to stock up on cheap debt and improve their capital structures.
Reuters: – How to play it – The post-QE3 yield chase. – With the Federal Reserve’s Sept. 13 announcement that it would start a third round of quantitative easing, the central bank continued its attempt to drive interest rates lower to spur lending and consumption. While that may be good for borrowers who can lock in record-low mortgage rates, sinking bond yields mean that dependable investment income is harder to find.
John Overstreet: – Are we driving bond bull over a fiscal cliff? – With the approach of the “fiscal cliff” in the US, it might be useful to consider what effect significant deficit reduction might have on the Treasury market. Conventional wisdom appears to be all over the map.
Bloomberg: – Build America’s first deal saves schools $1.25 million. – Build America Mutual Assurance Co. became the first new insurer to back local-government debt since Warren Buffett’s Berkshire Hathaway (BRK/A) Assurance Corp. in 2007, saving Pennsylvania taxpayers more than $1 million in its debut.
Reuters: – US muni bond funds report $592 million inflows. – U.S. municipal bond funds posted $592 million of net inflows in the week ended Sept. 26, up from $256 million of inflows in the previous week, according to data released by Lipper on Thursday.
Bond Squawk: – Understanding the life cycle of a rally in corporates can lead to further gains. – There are many headwinds that could plague markets and keep investors awake at night in the weeks and months ahead. The European Debt Crisis, the Fiscal Cliff, weakening corporate earnings and the muddle through U.S. economy are reasons that could create volatility and uncertainty around the market place.
Kurt Shrout: – Future inflation’s impact on bonds. – Inflation is the reason often cited for why bonds may perform very poorly in the future. But the fact that bond and stock prices tend to move in opposite directions, and the fact that no one knows what the future holds for certain, are reasons for investing some portion of your portfolio in bonds anyway, even if you think the returns will be poor.
Learn Bonds: – Why junk bonds might be less dangerous than many think. – When venturing into the world of junk bonds, it may feel safer to purchase a diversified high-yield mutual fund or ETF as opposed to buying individual bonds. I agree that diversification is an important element of any portfolio, especially among non-investment-grade bonds. But I would also like to note that the risks of default among issuers of high-yield debt may not be as great as many investors assume.
Yahoo: – 2 Arrested after Jeff Gundlach art heist. – Two suspects were arrested and found with about $10 million worth of art stolen from the home of DoubleLine founder Jeff Gundlach, Santa Monica police said Thursday. The arrest comes a week after Gundlach posted a $2.7 million reward for the safe return of the art. His Porsche however; is still missing.
Zero Hedge: – Winners and losers since QE3 – Hint MBS Wins! – As we end the month and quarter, we remind ourselves that a massive amount of the recent ‘strength’ in risk markets occurred on just two days – ECB and Fed statements. Reflecting on the post-euphoria ‘sell-the-news’ or BTFD meme, we look at how various asset classes and securities have performed post-QEternity.
WSJ: – A message from the city that went bankrupt. – How did the city of Stockton, Calif. go bankrupt in June? It’s not the simplistic story that so many pundits claim. And I’d know: I’m Stockton’s city manager—effectively a CEO who reports to the City Council.
CNN: – Muni buyers beware. – Cracks are starting to appear in the municipal bond market. If you’re investing for income, it’s time to pay attention. Consider: Three California cities filed for bankruptcy this summer — unusual in such a short period — and ratings agencies warn that more trouble is coming.
BondBuyer: – California’s crowded ballot may lower success rate. – On this year’s crowded Nov. 6 ballot, voters will decide 237 local revenue measures seeking approval for taxes, bonds or fees, including 106 school general obligation bond measures and seven local government GO bond measures seeking a total of $14.97 billion from voters.
NASDAQ: – 7 bond ETFs yielding more than 10-Year Treasury rates. Here are seven products from the ETF industry, targeting the bond space. These presently yield more than the benchmark 10 year Treasury rates of 1.83%. These ETFs provide investors with a basket of securities from various issuers across different maturity buckets.
Moody’s downgraded Chicago Board of Education to A2. Surprise, surprise.
— Bond Girl (@munilass) September 28, 2012
next week in #muniland: $7.45bn expected vs this week’s $7.47bn. Neg: $6.35bn vs this week’s $6.14bn. Com: $1.1bn vs this week’s $1.33bn
— Taylor Riggs (@TaylorRiggs_BB) September 28, 2012
Foreign investors hold $89 billion of municipal bonds, up 10.3 times from 2001. Foreign holdings of treasuries up 4.3 times for same period.
— Rochester Funds (@RochesterFunds) September 28, 2012
Gross: Fiscal gap? Don’t sweat the small stuff. US faces a long term fiscal Grand Canyon. More details in next Tuesday’s Investment Outlook
— PIMCO (@PIMCO) September 28, 2012