To get the Best of the Bond Market delivered to your email daily click here.
Bill Gross will be glad to see the back of the first quarter. It started with his well documented bust up with former Co-chief executive Mohamed El-Erian, which was followed by a first quarter performance which can best be described as subpar, after Gross’ much publicised bet on short term Treasuries went sour.
All of which has investors looking for the exit, pulling $5.1 billion from PIMCO’s flagship Total Return fund between January and February this year, and a total of $15.45 billion from U.S. open-end mutual funds in the first quarter. And now, to top it all, it transpires his beloved cat “Bob” died last week, after fourteen years of devotion.
It never rains but it pours in the Gross household. But Gross is nothing if not an optimist, and he’s hoping to draw a line under the first quarter and come out fighting in the second. After all the outsized performance of the long end so far this year, can be partly attributed to bad weather in February. And Gross never claimed to be a weatherman.
In this months investment outlook, after reminiscing about his cat. Gross reiterates his, stay at the short end mantra. Recommending overweighting credit and underweighting duration. “Although credit spreads are tight, they are not as compressed as interest rates, which are now in the process of normalization.” Gross says.
He warns, however, that 5 to 30 year maturities are “at risk.” He also repeats his oft-repeated recent believe that all returns will be small in the near/distant future.
One quarter doesn’t make for a year. But investors are an unforgiving bunch, Gross can’t afford another quarter like the last one. For Gross’ strategy to come off he needs to see some positive data coming out of the world’s largest economy. Starting with tomorrow’s non-farm payrolls data.
Todays Other Top Stories
Reuters: – Citi top muni bond underwriter in first-quarter amid lagging supply. – Citigroup was the top underwriter of U.S. municipal bonds in the first quarter of 2014 as total supply shrank to $60.4 billion, down 25.7 percent from the same period in 2013, Thomson Reuters reported on Tuesday.
Columbia Management: – Why muni bonds make sense in 2014. – We think investors are going to be very surprised when they get their tax bill in April. With the impact of the higher federal tax bracket, the new net investment income tax of 3.8%, and higher state income taxes across the country. This is why muni bonds make more sense than ever.
Talent Refresh: – What you should know before investing in municipal bonds. – When considering investing money in municipal bonds, you will want to know what you are getting into. Here are six things you should definitely know before you invest in municipal bonds.
LearnBonds: – Are bond interest rates finally beginning to rise? – Are bond interest rates finally beginning to rise? All winter, investors have been waiting for government bond yields to start moving higher, only to be disappointed again, and again, and again.
WSJ: – Treasury bond prices snap 4-day decline. – Treasury bonds rose for the first time in five sessions Thursday, boosted by a disappointing labor-market release. Investors stepped in to buy debt, deeming the yield on the benchmark 10-year note near a one-month high as attractive.
WSJ: – Investors clamor for risky debt offerings. – Investors are snapping up low-rated securities backed by companies, home mortgages and car loans at a clip rarely seen since the financial crisis, as fund managers and others tire of paltry yields on safer assets.
FT: – ‘Sellside’ warns on high junk bond valuations. – A growing cadre of bond specialists employed by the big banks that make their money by selling securities to investors is warning that valuations in the junk bond markets are too high.
FT: – EMs increasingly unstable amid US Fed taper fallout. – You are an aspiring emerging market economy keen to catch up with richer western rivals. What is the best way to harness global capital markets?
WSJ: – Moody’s is no-show in bond deal rating. – When the sale of more than $1 billion in commercial-mortgage bonds went off without a hitch last week, one name was conspicuously missing from the prospectus: Moody’s Investors Service.
David Fabian : – 5 Key strategies for ETF income investors. – Now that we just closed out the first quarter, this is a perfect time to review your statements and assess the strengths and weaknesses of your portfolio. Through this analysis, you may find areas that can be adjusted to enhance your returns for the remainder of the year.
Business Insider: – Gary Shilling: Here are my 9 investment picks for the current risk-on environment. – Gary Shilling thinks we’re still in a ‘risk on’ investment climate. With that in mind he lists nine investments he thinks are attractive, here they are.
MoneyBeat: – Gross keeps buying shorter-dated bonds. – Despite lagging performance during the first quarter, Bill Gross sticks to his stance: buying shorter-dated bonds.
Morningstar: – A conservative 3-bucket ETF portfolio for retirees. – We revisit and make a modification to our portfolio for those with shorter time horizons.
Reuters: – DoubleLine Total Return had $263.8 million of inflows in March. – The DoubleLine Total Return Fund, which is overseen by high-profile investor Jeffrey Gundlach, had inflows totaling $263.8 million in March and $211 million in the first quarter, DoubleLine Capital said on Wednesday.
ETF Trends: – Institutional use of bond ETFs on the rise. – Bond exchange traded funds roared back in the first quarter as market volatility pushed investors into more conservative plays, and the strong inflows suggest that institutional investors may be taking a closer look at the investment vehicle.
Income Investing: – Bonds face threat from strong spring data – Morgan Stanley. – Count Morgan Stanley Wealth Management among those who think the spate of weak economic data this winter will give way to much stronger economic readings as the weather warms up.
WSJ: – Long-term mutual fund inflows $3.48 billion in latest week. – Long-term mutual funds reported estimated inflows of $3.48 billion in the latest week as investors added to foreign equity, bond and hybrid funds.
Bloomberg: – Long bonds lure BlackRock in best start since 2009. – The longest-dated municipal bonds are rallying the most in five years, attracting investors such as BlackRock Inc. (BLK) and giving localities a chance to lock in lower borrowing costs for decades.
Puerto Rico didn’t default – china & Itrax Asia lot tighter – just coz biz would be good if got a new Lehman doesn’t mean it will happen
— Peter Tchir (@TFMkts) April 3, 2014
In time for election “@NathanBomey: BREAKING: Detroit emergency manager Kevyn Orr says he wants the city to emerge from bankruptcy by Oct 15
— Cate Long (@cate_long) April 3, 2014
My recommendation is that If you are in the “pre-NFP jitters” trade (shorter maturity bonds) cover tomorrow morning before the print.
— Ed Bradford (@Fullcarry) April 3, 2014