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While Mohamed El-Erian’s departure from PIMCO garnered most of the headlines, he is not the only high profile employee to depart the bond giant in the last twelve months. Marc Seidner, an ally of El-Erian quit the bond giant 48hrs before El-Erian’s departure was announced.
Seidner, who was seen as a close confident of El-Erian having previously worked together at the Harvard University endowment fund, reportedly turned down an offer to become one of Gross’s top lieutenants.
To see a list of high yielding CDs go here.
Seidner opted instead to leave the swaying palm trees of Newport Beach, heading back to the East Coast to become head of fixed income at the Boston-based money management firm run by contrarian investor Jeremy Grantham.
Here, Seidner is free to make his own investment choices and no longer has to seek approval for his trades from the “Bond King”. Seidner’s first trade was a somewhat counter-intuitive call that bond yields would fall, not rise further as many had predicted.
Seidner sensed that last year’s Treasury market upheaval triggered by speculation about when the Federal Reserve would start reducing its bond-buying stimulus – the so-called “taper tantrum” – had left pockets of value in some longer-dated bonds.
Fast forward six months and Seidner’s bet was on the money. His core U.S. bond fund is outpacing 98 percent of its peers and easily beating Gross’s PIMCO Total Return Fund, the world’s biggest bond portfolio, as the yield on the 10-year Treasury note has fallen roughly 60 basis points this year.
While there is a huge difference in the size of the two funds – it is much easier to maneuver with a smaller fund like Seidner’s – both funds are regarded as directly comparable for bond investors.
Todays Other Top Stories
LearnBonds: – Making tough asset allocation choices in retirement. – While each retired investor’s assets, goals, and risk tolerance will vary, a sound investment course of action to follow is that of diversification. Owning different asset types at different parts of the corporate capital structure enables investors to spread the risks that each investment entails. Though some investors may be predisposed to owning only stocks or only bonds, in reality a mix of both assets is probably the safest course of action.
Bond Case Briefs: – S&P widens lead over Moody’s as bond upgrades surge: Muni credit. – Standard & Poor’s is pulling away from Moody’s Investors Service in the business of grading U.S. municipal bonds. Janney Montgomery Scott LLC’s Tom Kozlik says the gains reflect local governments shopping for the best ratings.
WSJ: – Puerto Rico Power Authority faces Thursday deadline to extend credit. – Puerto Rico’s cash-strapped electric power authority faces a key deadline on Thursday to extend lines of credit with banks or face a possible restructuring of about $9 billion in total debt.
LPL Financial: – Bond market perspectives. – The strength of European government bonds has supported demand for US Treasuries due to more attractive yield differentials. European influences may continue over the near term, but we expect U.S. bond yields to reconnect to domestic economic data in coming months.
WSJ: – Bonds, not bailouts, for too big to fail banks. – Too big to fail remains unresolved in the U.S. Last week the Federal Reserve and the Federal Deposit Insurance Corp. said that not one of the nation’s 11 largest banks could fail without threatening the broader financial system. The news came after regulators reviewed the banks’ “living wills,” the emergency plans required under the 2010 Dodd-Frank law.
Breitbart: – China appears ready to dump its U.S. Treasury bonds. – The real power to determine U.S. interest rates may be in the hands of China, according to Lombard Street Research. Facing an overvalued currency that is hurting corporate profits and slowing growth, China appears ready to dump its $1.3 trillion in U.S. Treasury bonds to drive U.S. interest rates up and strengthen the dollar.
Reuters: – Bond yields fall on weak data before 10-year supply. – U.S. Treasury debt yields fell on Wednesday as disappointing data on U.S. retail sales revived bets the Federal Reserve might leave policy rates near zero for a longer period in a bid to keep the economic recovery on track.
ETF Daily News: – Safe haven ETFs to consider in the current volatility. – Though the U.S. markets staged a solid recovery during the first half of the year, hitting multi-year highs and ignoring geopolitical threats and lackluster economic data, they have been in a defensive mode in the past few weeks retreating in many sessions.
High Yield Bonds
CNBC: – Avoid high yield corporate bonds: Pro. – Edmund Shing, global equity portfolio manager at BCS Financial Group, says the relief rally in the market has come to an end and discusses volatility in high-yield corporate bonds.
Reuters: – Panicky U.S. junk bond investors flee funds despite good returns. – Investors fleeing the U.S. junk bond market at a record pace this summer are punishing some of the sector’s best-performing funds, while some middle-of-the-pack peers are unscathed.
USA News: – Like stocks, junk bonds show investor jitters after yields fall to record lows. – The stock market isn’t the only place that’s been signaling jitters among investors. The $2.3 trillion market for risky U.S. corporate debt has also been under pressure.
ETF Daily News: – What’s driving the recent high yield sell-off? – One area where we have seen a lot of inflows is high yield bonds, as this sector has offered yields above 5%. Investors have been less concerned about default risk as global defaults fell below 2% and volatility in both stocks and bonds remained low, making high yield investments all the more appealing. In the past few weeks we have seen some cracks in the high yield picture.
ETF.com: – High-Yield ETFs not only way to junk debt. – Over the past few years, assets flooded into high-yield bonds, and it has become a crowded trade. It makes me think that while high-yield bond ETFs have their place in a diversified portfolio, investors would be wise to look beyond high-yield ETFs to get diversified high-yield exposure.
AllianceBernstein: – High-yield bonds: Call waiting. – High-yield bonds’ attractive income has made them popular in today’s low-rate environment. But market complacency has caused callable-bond investors to ignore a lurking risk: duration extension in a rising-rate scenario.
Bloomberg: – Icahn’s bubble worry meets onslaught of debt complacency. – Not even escalating geopolitical conflicts can grind this rally in high-risk debt to a true halt.
Business Insider: – Novice junk-bond investors are ignoring a lurking risk. – High-yield bonds’ attractive income has made them popular in today’s low-rate environment. But market complacency has caused callable-bond investors to ignore a lurking risk: duration extension in a rising-rate scenario.
Bloomberg: – Morgan Stanley sees Russian bond rout propelling buybacks. – Russian companies are set to seize on sliding asset prices to buy back their bonds, helping stem the third-biggest rout in emerging markets, according to Morgan Stanley and Erste Sparinvest.
About Money: – Should you buy the short term USD emerging markets bond (EMSH) ETF? – Bond investors face a difficult choice when it comes to emerging market bonds. While the emerging markets offer above-average yields, they also feature substantial risks in terms of their potential volatility. Is it worth picking up an extra couple of percentage points of yield when 5%-10% corrections occur about once every year, on average?
The World Bank: – Disaster Risk: Using capital markets to protect against the cost of catastrophes. – the World Bank Treasury has been helping our clients protect their public finances in the event of a natural disaster. The most recent innovation is our new Capital-at-Risk Notes program, which allows our clients to access the capital markets through the World Bank to hedge their natural disaster risk.
Donald van Deventer: – Kinder Morgan energy partners leads the 20 best value bond trades, August 11, 2014. – We show that investors have not demanded more spread as default risk goes up, which is why ranking “best value” by the spread to default ratio is important.
Dividend Channel: – 10 Top ranked high yield REITs. – A look at the top 10 highest ranking high yield REITs.
Reuters: – U.S.-based bond funds post $8.2 billion outflows, biggest since Aug. 2013. – Investors in U.S.-based mutual funds pulled $8.2 billion out of bond funds in the week ended Aug. 6, marking their biggest weekly outflows in nearly a year, data from the Investment Company Institute showed on Wednesday.
Crescenzi: JOLTS data show more job openings but at what pay? The Fed won’t be jolted until slack diminishes & wages rise.
— PIMCO (@PIMCO) August 13, 2014
The value of bonds in the leading high-yield index, up from $1 Trillion in 2010 (BB).
— Financial Trivia (@financialtrivia) August 13, 2014
After receiving $270mln in retail orders on Monday/Tuesday, today #NYC found better institutional interest & was able to lower ylds slightly
— Muni Market Advisors (@Muni_Mkt_Advis) August 13, 2014