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The world’s largest bond fund, Pimco Total Return (TLT), is trailing 87 percent of its peers so far this year, according to Morningstar data released on Friday.
Pimco Total Return, the Newport Beach, Calif. firm’s flagship portfolio, is posting returns of 1.28 percent year-to-date as of March 27, trailing the benchmark Barclays U.S. Aggregate index by 75 basis points for the same period.
The news comes at a critical time for the funds co-founder Bill Gross, who was forced into a management reshuffle, after the shock resignation of the funds Co-Chief Executive Mohamed El-Erian in January.
Morningstar senior analyst Eric Jacobson said the most important issue that hurt Pimco Total Return’s performance in March “may have been that it was a blockbuster month for long maturity bonds and a lousy one for shorter maturities.”
Pimco’s Total Return Fund, has been significantly overweight in shorter debt and correspondingly very underweight in long bonds, “so much so in fact that the fund has even been using swaps to achieve a modest short position on the longest maturity debt,” Jacobson said.
Despite this quarter’s poor performance, Morningstar recently reaffirmed its Gold Rating on Pimco Total Return last week as “Gross is still one of the best around; modest showings in 2011 and 2013 were disappointing, but expectations of perfection weren’t realistic either.” Jacobson said.
Todays Other Top Stories
Think Advisor: – How tax efficient is your muni bond portfolio? – Investors typically think of municipal bond products as being tax-free. However, in many cases, that is not the reality.
WSJ: – SEC reviewing municipalities’ disclosures. – Regulators have opened investigations into municipalities that may have misled investors about their financial condition, the top official at the Securities and Exchange Commission’s municipal-bond enforcement unit said Thursday.
Bloomberg: – Best start since ’09 defies forecast of annual loss. – The $3.7 trillion municipal market is off to its strongest start in five years, erasing investor losses from 2013 and providing localities a chance to lock in borrowing costs near generational lows.
MuniNetGuide: – Puerto Rico’s retail trading mess. – When it comes to Puerto Rico, there is never any dearth of controversy, it seems. The PR G.O. issue was widely touted as a ringing success when it came to market a couple of weeks ago. By now, it has become quite apparent that many of the participants were short-term traders looking for a quick profit or retail traders looking to push bonds onto retail at a hefty markup.
Janney Capital Markets: – Chapter 9 municipal bankruptcies remain low. – Chapter 9 municipal bankruptcy filings are not rising despite the popular perception. In fact, they have remained rare and the overall par amount affected has remained rather minimal for most municipal bond investors.
Reuters: – University of California debt tops U.S. municipal bond calendar. – New sales in the U.S. municipal bond market will continue to shrink next week, even with the University of California issuing nearly $1 billion in debt.
WSJ: – For munis, SEC offers carrot, threatens stick. – Officials with the Securities and Exchange Commission’s municipal-enforcement unit are urging local governments and the banks that help them sell bonds to self-report certain violations related to disclosure, indicating that harsher penalties could be sought if the violations are discovered later.
LearnBonds: – Three dividend paying stocks. – Ben Franklin had it right when he said there are only two certainties in life: death and taxes. Admittedly, I’m no Founding Father, but in my view there is a trio of exceptionally well-managed, publicly traded companies whose products are so fundamental to the way modern man lives that, if not existential certainties, are darned close to it. And what sets them further apart as paragons of investing virtue is their unbroken record of growing dividends that is likely to continue as far as the mind’s eye can see. In short, they’re the ultimate keeper stocks.
Bloomberg: – Treasuries poised for 1st monthly loss this year on Fed outlook. – Treasuries were poised for their first monthly loss this year as consumer spending, which accounts for about 70 percent of the U.S. economy, climbed the most in three months.
Market Realist: – Will investors prefer investment grade over high yield in 2014? – Short interest is the number of shares of a security that have been sold short by short sellers, who expect to profit from a fall in the price of the security. The short interest ratio (or SIR) for an ETF is the number of shares of the ETF that are sold short divided by the average daily trading volume, computed over the past 30 days. The ratio represents the average number of days required to enable short sellers to purchase the shares sold short or borrowed.
Market Realist: – How credit risk equations change for high yield bond ETFs. – The low yields on investment-grade fixed income securities was partly responsible for forcing investors to put their money into non–investment grade bonds, as high-yield bonds offer a higher yield compared to investment-grade bonds since they’re rated riskier securities. The difference in yields between investment-grade and non–investment grade bonds is called the “credit spread,” or the compensation for investors assuming higher credit risk.
Forbes: – Large ETF outflows decimate high yield bond inflows. – Retail cash flows for high-yield funds reversed course and turned into the red, with an outflow of $257 million in the week ended March 26, according to Lipper. This is the first outflow after six consecutive weeks of inflows, for a net infusion of $4.4 billion over that span.
Oakshire Financial: – Last chance to ride the HYG junk train? – As much as we’ve touted it and even purchased this oft-maligned asset class over the years, the truth is it’s been stuck for almost half a decade.
Herald Online: – Bargain hunters starting to take a close look at emerging market debt, says Market Vectors’ Fran Rodilosso. – Bargain hunters are slowly moving back into emerging market (EM) debt, with local currency funds recently seeing their first net inflows in more than nine months, says Fran Rodilosso, fixed income portfolio manager for Market Vectors ETFs.
Bernardi Securities: – The problem with waiting for the “Fed” to raise rates. – Following Janet Yellen’s recent testimony, many investors may just want to wait for Federal Reserve policy makers to raise interest rates before committing money to the bond market. After all, the fed funds rate has been held in the 0% to 0.25% range for years so rates must go up, right?
MarketWatch: – 4 investments you don’t want to own. – In the last decade, U.S. stocks rose and fell twice. Bond prices soared as yields tumbled. Gold racked up huge gains, as did industrial commodities and “commodity currencies” like the Australian and Canadian dollars. And emerging markets were king.
NASDAQ: – Vanguard short-term bond ETF experiences big inflow. – Looking today at week-over-week shares outstanding changes among the universe of ETFs covered at ETF Channel , one standout is the Vanguard Short-Term Bond ETF (Symbol: BSV) where we have detected an approximate $104.1 million dollar inflow.
Cincinnati.com: – Ready for lower bond values? – The recent news from the Federal Reserve Bank has been clear: Believe it or not, interest rates will actually be allowed to move higher sometime in your lifetime. As rates gradually rise, the bond portion of your investments will take on more risk, so caution is called for. Are you and your money prepared?
TheStreet: – How bond ETFs crushed stock ETFs in the first quarter. – Don’t blame weakness in home sales on weather conditions. The National Association of Realtors’ pending home sales index has fallen for eight consecutive months. In fact, you can trace the trouble directly back to when 30-year fixed mortgages pole-vaulted from 3.5% to 4.5% in the summer of 2013.
MarketWatch: – What is the bond market trying to tell us? – It’s a widespread belief that we’re in a rising-rate environment. The only problem is that Treasury yields have fallen so far in 2014, despite Federal Reserve “tapering” and recent concerns the Fed may raise rates sooner than expected.
Gross: PCE core inflation only 1.1%. Most important number of the month. Market doesn’t notice. PIMCO does. Dovish Fed.
— PIMCO (@PIMCO) March 28, 2014
Surprisingly the adjustment mostly happened with bond yields falling. — Ed Bradford (@Fullcarry) March 27,
Bonds down a point and 5s 30s can’t even get a small bounce. Front end is heavy. — Ed Bradford (@Fullcarry) March 28, 2014
outflows of $212.2 million for weekly reporting #muniland funds, reversing six weeks of inflows. tax season?
— Taylor Riggs (@TaylorRiggsMuni) March 27, 2014