WSJ: – Treasurys stung by selling linked to corporate bond sales. – Robust demand for corporate bonds continues to encourage companies to sell new debt. To hedge against the risk of higher borrowing cost, companies typically sell Treasury bonds as a hedge ahead of next week’s corporate bond sales.
Lexology: – How the new ‘fiscal cliff’ law affects the municipal bond market. – The American Taxpayer Relief Act of 2012, passed by the Senate and the House and Representatives on New Year’s Day, includes several direct and indirect consequences for the municipal bond market.
FT: – Investors abandon bonds and pile into shares. – Investors poured more than $20bn into equity funds this week as global shares surged and a compromise deal on the US fiscal cliff boosted confidence. The figures capped a week during which global equity indices hit multi-year highs, encouraging speculation about a “great rotation” this year out of safe, recession proof assets such as government bonds and into equity markets.
Learn Bonds: – Bill Gross likes the 5 year Treasury. Here’s why. – The large majority of investors and market pundits think that treasuries of all flavors are currently a terrible investment. So, when the world’s largest bond fund manager says that he likes the 5 year treasury, we take notice.
Bloomberg: Gross raises treasury holdings to highest since July – Bill Gross raised the percentage of Treasuries held in his flagship fund to 26 percent in December, the highest level since July, while warning of the inflationary risks of stimulus programs such as quantitative easing.
Off the Charts: 4 reasons state budgets are not out of the woods – End-of-year surpluses are common. Revenues haven’t fully recovered from the recession. The recent revenue growth isn’t nearly enough to reverse previous spending cuts. Looming cuts in federal grants will put states in an even deeper hole.
Millionaires Corner: – Millionaires and munis: A relationship on the decline. – The share of Millionaires owning individual municipal bonds has decreased by half over the past two years, according to new Millionaire Corner research that tracks a declining interest in municipal debt among affluent investors.
Philly.com: – What Goldman gets from Philadelphia. – Goldman Sachs’ plan to lend $15 million to smaller Philadelphia and Lancaster area businesses, and finance $5 million in small-business education at Philadelphia Community College, so why the charity? This is Goldman Sachs remember.
Hoisington Mgt: – Quarterly review and outlook. – With long-term Treasury yields around 3%, our view remains the same. The fundamentals of insufficiency of demand and its root cause, over-indebtedness, still point to an environment in which long-term interest rates remain on a path to lower levels.
WSJ: – Muni market exhales, and perks up. – Budget wrangling in Washington roiled the municipal-bond market at the end of last year, sending prices tumbling amid worries that new taxes would be levied on municipal-bond payments. That didn’t materialize, giving a fillip to muni prices in 2013. Moreover, tax increases imposed on the wealthy may end up spurring unexpected demand for tax-exempt municipal bonds.
Pensions & Investments: – Monetary policy drives bond market asymmetry. – The extent of Federal Reserve balance sheet expansion has been extraordinary, as has been the maintenance of low policy rate levels. In that context, a wide variety of asset classes have disconnected from their fundamental valuation underpinnings and it has become increasingly clear that Fed action is profoundly distorting U.S. fixed income markets.
Reuters:– Municipal bonds funds reverse course with inflows. – US municipal bond funds reported $1.55 billion of net inflows in the week ended Jan. 9, a reverse from the revised $6.8 million net outflows in the previous week, according to data released by Lipper on Thursday.
ETF Trends: – Muni bond ETF health check. – The volatility in municipal bond ETFs we saw at the end of 2012 due to speculation on the tax-exempt status of muni bonds and the U.S. fiscal cliff is pretty normal in terms of markets.
Barron’s: – Munis enjoying 2013 so far, see $1.55B weekly fund inflows. – After surviving the fiscal cliff deal with their tax-exempt status intact, municipal bonds are off to a good start in 2013, helped too because the cliff deal also raised top tax rates, which makes that muni tax-exemption even more valuable for top earners.
Financial News: – Citigroup rolling out electronic bond trading platform. – Citigroup is rolling out a new electronic trading system for corporate bonds, as it becomes the latest in a string of firms to respond to customers’ growing desire to trade directly with one another.
MarketWatch: – Rich bond yields you’re likely missing. – Some investors say emerging-market bonds are one of the most attractive places for capturing more yield at a time when the Federal Reserve’s bond buying program, intended to boost the U.S. economy, is lowering yields on domestic bonds across the board.
Fitch: – Fitch places Illinois GO bonds on rating watch negative due to unsustainable pension liabilities. – Fitch Ratings has placed the ‘A’ rating on the general obligation (GO) bonds of the State of Illinois on Rating Watch Negative. The rating action affects approximately $26.2 billion in outstanding GO bonds of the state. Ratings linked to the state GO rating, listed at the end of this release, have also been placed on Rating Watch Negative.
CBS MoneyWatch: – How taxing muni bonds would hurt cities. – To raise more revenue from wealthy Americans, various proposals have been made regarding the taxation of municipal bonds. It seems like an area ripe with opportunity, since it’s estimated that the federal government forgoes about $32 billion a year in taxes by exempting municipal bonds. However, such a move could ultimately end up hurting the cities and states issuing the bonds.
Gross: Yen weakness allows “funding currency” for global risk trades. Japan prints, forces others to replicate. Reflationary.
— PIMCO (@PIMCO) January 11, 2013
Blackrock on 2012 #muniland:A Banner Year, But Dented by a Blunt December
— Cate Long (@cate_long) January 11, 2013
Avg yield of high-yield bonds held near record low of 5.78% (Barclays data) today. If this keeps up “high-yield” will need a name change.
— AnthonyValeri (@Anthony_Valeri) January 10, 2013