Best of the Bond Market for October 5th, 2012
FT: – Wall St at cyclical high after US jobs data. –Treasuries are falling and Wall Street stocks are on course to challenge fresh cyclical highs after the official US jobs report showed solid job creation and unemployment unexpectedly dropping, boosting hopes for the world’s biggest economy.
Bloomberg: – Junk funds exodus continues. – Investors yanked $892 million from speculative-grade portfolios this week following last week’s $309 million outflow, according to data compiled by JPMorgan Chase & Co. (JPM) Invesco’s $1.1 billion ETF that owns junk notes reported an 11.6 percent decline in shares on Oct. 3, equivalent to about $124.7 million of market value, followed by about a $71 million outflow on Oct. 4, according to data compiled by Bloomberg.
Cate Long: – Puerto Rico’s airport giveaway. – Puerto Rico is in the process of leasing its Luis Munoz Marin International Airport to a Mexican firm Aeropuertos del Sureste (Aerostar). The airport (LMM) is the largest in the Caribbean, and it could become an international gateway to Central and South American cities. The lease deal lasts 40 years. However, studying the financial terms of the deal, it is not clear that Puerto Rico will really benefit much financially from privatizing the airport.
FT: – PIMCO’s El-Erian – Keep up the pressure – the US jobs crisis is not yet over. – The monthly US employment report has evolved steadily: once a lagging indicator of the underlying state of the economy, it is now seen more as a leading indicator of economic, political and social trends. Friday’s data tell us, for once, rather good news.
MarketWatch: – Cash is king over stocks, bonds and REITs. – Of course, you’re losing money to inflation sitting in cash, which pays nothing, but you’re reserving the opportunity to buy stocks, bonds, REITs and other investments at potentially cheaper prices later this year.
Crossing Wall Street: – Checking in on the slope of the yield curve. – Here’s another look at the spread between the 10-year and 2-year Treasuries. I like to check in on this metric every so often because it has a decent track record of going negative before a recession starts.
FT: – Muni bond issuers face end to smooth ride. – At the end of a 30-year bull market for debt instruments of all stripes, conditions are ripe for the bond markets to produce their own set of serial disappointments.
Bloomberg: – Chicago Mayor vows not to increase taxes after teacher strike. – Chicago Mayor Rahm Emanuel is trying to convince skeptical investors he can close a $300 million budget deficit without raising taxes and also narrow a $15 billion pension gap. Meanwhile muni investors are demanding a larger yield penalty on Chicago’s general obligations.
In Pursuit of Value: – The risk-return equations for bonds is no longer attractive. – There’s never any easy money to be made, but neither iShares Investment Grade Bond ETF (LQD) or the JPMorgan Emerging Market Bond Fund (EMB) appears that compelling today. Earning the current yield would seem to be the best plausible outcome on LQD and EMB.
About: – September 2012 and year-to-date bond market returns. – Fixed-income investors who were diversified overseas experienced robust returns in September, as international government bonds and emerging market debt topped the performance charts.
Kurt Shrout: – Determining the best bond funds: True future total return. – To determine the best bond fund investment(s), you need to estimate what the true future total returns (TFTRs) of the candidate bond funds will be. You should always consider each of these elements before choosing your bond fund.
Learn Bonds: – DoubleLine finally gets a five star rating. – LB Ratings has announced that it is initiating coverage of the DoubleLine Total Return Bond Fund with a five star rating. A five star rating means, “We love the fund and would consider investing ourselves.”
Bond Buyer: – Muni pros gear up for year-end investment strategies. – Despite speculation over what may befall the municipal market in the fourth quarter, portfolio managers and strategists are not letting concerns over the upcoming presidential election, potential tax reform or an expected seasonal supply surge derail their plans to unfold year-end investment strategies.
Reuters: – US muni bond funds post $553 mln inflows in latest week. – U.S. municipal bond funds posted $553 million of net inflows in the week ended Oct. 3, down slightly from $592 million of inflows in the previous week, according to data released by Lipper on Thursday.
Charles Margolis: – HP Bonds offer yield and uncertainty. – Hewlett-Packard (HPQ) went down nearly 13% today after announcing its 2013 outlook. The question on many investors’ minds is can Meg Whitman, former CEO of eBay, turn HP around.
WSJ: – Investors Jump Off the ‘Junk’ Pile. – The massive “junk”-bond boom is raising alarm bells among some large money managers, who warn the market is showing signs of overheating. So much money has flooded into the junk-bond market from yield-hungry investors that weaker and weaker companies are able to sell bonds, they say.
Oppenheimer Funds: – Can investors still find good value in the muni market? – Your mortgage foreclosure may have degraded the market for my house, but your town’s budget woes don’t necessarily drag down my town’s bonds. Investors who look closely at the purpose (essential, please) and support for municipal debt will, I believe, continue to find good value in the market.
Colorado Springs: – Rumors of muni bonds’ peril are greatly exaggerated. – Municipal bonds used to be the quintessential safe-but-dull investment. But ominous headlines about cities, recently including San Bernardino and Stockton in California filing for bankruptcy, have spurred some investors to rethink these investments.
taxable muni funds saw highest weekly flows for year: $18.1bn this week. Equity funds saw outflows of $4.5bn over same period -JPM
— Taylor Riggs (@TaylorRiggs_BB) October 5, 2012
— Cate Long (@cate_long) October 5, 2012
Gross: Bet on reflation and reflationary policies from central banks. TIPS and short maturities in U.S. Buy Spain and Italy in EU.
— PIMCO (@PIMCO) October 5, 2012
— Cate Long (@cate_long) October 5, 2012
CCC are getting tougher to sell… Tone is changing broadly. Not getting paid for the risk.
— JunkBondMom (@junkbondmom) October 5, 2012