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Investors took shelter in safe haven government bonds on Friday as U.S. airstrikes in Iraq heightened geopolitical tensions, which are already on tenterhooks following an escalation in Russia’s trade war with the West and the continuing Israeli-Palestinian conflict.
Yields on 10-year Treasuries fell during U.S. trading, while German bunds and UK gilts also suffered as investors took flight from stocks. U.S. Treasury yields sank to their lowest level in more than a year to 2.39per cent.
To see a list of high yielding CDs go here.
The rout in high-yield debt also continued, with investors pulling a record $7.1bn from U.S. high-yield bond funds in the week ending August 8, according to data compiled by Lipper.
Investors have grown weary of high-yield debt as speculation mounts that the U.S. Federal Reserve will raise interest rates sooner than originally expected.
While shares on Wall Street edged higher in the morning, despite a 3pc plunge in Japanese shares and the first US air strikes on Iraq since 2011. Stock markets, which have come off highs recently amid growing talk of a correction after a five-year bull market, remained wary.
Gold, a traditional safe haven in times of trouble, rose $5.25 to $1,317 an ounce, before slipping back to $1,311 in the afternoon after the Iraqi air attacks.
Todays Other Top Stories
LearnBonds: – Favorable trends make Home Depot a buy. – After a rousing five-year growth trajectory, the question for Home Depot (NYSE: HD), the world’s largest home improvement retailer, is: can it continue? I say it can and recommend that you consider buying the stock.
Reuters: – U.S. municipal bond funds post another week of inflows -Lipper. – Demand for U.S. municipal bonds has remained strong throughout the summer, a key investment season, with municipal bond funds posting $16.6 million in net inflows for the week ended Aug. 6, according to Lipper data.
Reuters: – New York City, Port Authority to both embark on large refinancings. – Two heavy-weight refunding deals from the New York region will dominate U.S. municipal bond issuance next week, which will likely total $6.97 billion, according to Thomson Reuters estimates.
Intelligent Investing: – Muni bond manager’s journal: Why it’s bad news for investors when bonds get a call. – In today’s environment of ultra-low interest rates, finding tax exempt income is a challenge for all investors, whether you are managing a multi-billion dollar mutual fund or your own personal account.
BlackRock: – 3Q muni credit highlights: Know what you own. – The familiar names continue to make headlines, but overall creditworthiness in the municipal market is the strongest it has been in over five years.
Austin Capital: – Ultralong bonds going strong. – The sales of so-called ultralong bonds represent a small corner of global financing markets, but fears that rates will soon rise have drawn several borrowers to the market. Investors such as pension funds and insurance companies are the main buyers, gobbling up the bonds to help match up payment obligations down the road with funds they will collect far in the future.
WSJ: – U.S. Treasury bond yield hits lowest since June 2013. – Benchmark government bond yields in the world’s most advanced nations on Friday fell to fresh lows of 2014 as geopolitical worries boosted the allure of haven bonds.
Businessweek: – Berkshire leads most daily bond sales in U.S. since June. – Sales of corporate bonds in the U.S. exceeded $10 billion today for the first time since June 30 as investment-grade companies take advantage of a decline in borrowing costs to refinance debt and fund stock buybacks.
Corporate Financing Week: – eBay the latest tech firm to tap bond market. – Corporate bond sales activity is rising in the global tech sector at present. Dealogic data shows that debt issuance in the tech sector has reached a y-t-d high of USD71.2bn so far in 2013, up 2% on the previous record high of USD69.8bn raised by firms from the sector issuing bonds during the 2013 y-t-d. Within this rally in deal making, the size of deals has been increasing too.
High Yield Bonds
Forbes: – U.S. high yield bond funds see shocking, record $7.1B cash outflow. – Retail-cash outflows from high-yield funds ballooned to a shocking, record $7.07 billion in the week ended Aug. 6, with ETFs representing just 18% of the sum, or roughly $1.28 billion, according to Lipper. The huge redemption blows out past the prior record outflow of $4.63 billion in June 2013.
FT: – Investors flee U.S. junk bonds. – Investors have fled the U.S junk bond market in the past week, withdrawing a record amount from mutual funds and exchange traded funds that buy the high-yield securities.
Wall Street Breakfast: – Record bond and ETF outflows continue. – High-yield bond funds and ETFs totaled record outflows of $7.1B in the week ending Wednesday, Lipper reports, which shatters the previous record single-week outflow (set during the June 2013 bond-market swoon) of $4.6B.
CNBC: – Junk bond warning? No way, says BofAML strategist. – As high-yield bonds have dropped in recent weeks, words like “bubble” and “warning sign” have been thrown around. Some have said the class of corporate bonds, which pay higher yields due to a higher perceived risk of default, is a canary in the coal mine for other asset classes. But Bank of America Merrill Lynch’s head of high yield strategy, Michael Contopoulos, says that concerns about the space are unfounded.
WSJ: – Junk-bond exodus accelerates. – Investors pulled a record $7.1 billion from junk-bond funds in the week ended Wednesday, fund tracker Lipper said, the latest sign of investor anxiety following a long rally.
FT: – Junk bond funds face a Matrix moment. – In the 1999 science fiction film, The Matrix is a simulated world created by machines to keep humans complacent. In real life 2014, the Matrix is a pricing methodology used by fund managers to value bonds that are trading in increasingly illiquid markets.
Hedge Fund Insight: – Recent setback in high yield was technically driven. – The U.S. high yield market’s decline in July was its first setback in nearly a year. Could this be a sign of continued weakness or merely a correction? We believe continued strong fundamentals could point to a short-term sell-off and a fairly rapid rebound.
Bloomberg: – Junk-Bond selling frenzy neutralized as Wall Street buys. – Evidently there was a scare in the U.S. high-yield bond market this past week. Just don’t ask traders about it. They might have missed it.
Citywire: – Cut developed corporates and up EM sovereigns, says bond star. – Improvements in emerging market sovereigns has led bond star Cedric Morisseau to reallocate cash out of corporate bonds and into the developing markets.
ETF Trends: – Broad stock, bond ETFs to diversify a portfolio. – Instead of painstakingly picking out individual stocks, investors can utilize broad index-based exchange traded funds to efficiently and cheaply diversify their portfolios.
MarketWatch: – Your money is at risk when mutual funds aren’t diversified. – We buy mutual funds because the people running them are supposed to be smarter than us. At least they should be sufficiently astute and disciplined to avoid the mistakes that ordinary investors are prone to make, like taking excessive risk to obtain higher returns and failing to diversify adequately.
Reuters: – New ProShares ETFs focus on credit of junk bond issuers. – Investors looking to bet on the credit of issuers in the high-yield bond market can do so now with the launch of two exchange-traded funds, the first of their kind, backed by credit default swaps.
InvestorPlace: – 2 cheap REITs throwing off high yield. – Last week, a stronger-than-expected GDP report spooked Wall Street, causing stocks to sell off a bit. The fear of higher rates is the boogey man that keeps traders up at night, because the removal of the low interest rate punch bowl could bring stocks’ five-year party to a screeching halt.
Strong move in bonds again – this is a pain trade for many
— David Schawel (@DavidSchawel) August 8, 2014
somewhere out there Don Meredith is singing “turn out the lights…the party’s over”…”yield” now a missing person in muniland — Michael Pietronico (@MillerTabak) August 8, 2014
good solid NY credits trading on a sleepy Friday. MTA, DASNY, NY waters, and City GOs
— Taylor Riggs (@TaylorRiggsMuni) August 8, 2014