Best of the Bond Market for March 19th, 2012
Making Hay With Munis – Our Take: Barron’s interview with one of the top muni bond mutual fund managers. Makes the statement that the muni market is not efficient so there is lots of value to be had for those who are willing to do their research. Doesn’t go into any detail there as to why he thinks thats the case, but probably because there are not as many people actively following the market, and because its an over the counter non centralized market with a huge amount of issues, its easier to discover value when looking that others have not. Gives 5 picks which those looking to buy individual municipal bonds should consider.
Individual Bonds vs. Bond Funds - Our Take: Good overview of some of the things that the investor should consider when choosing between individual bonds and bond mutual funds. Good list of some of the downsides of going with bond funds over individual bonds including –
Read the article to find out more on each.
Tweet and article from @Cate_Long
The argument for Municipal Bond Mutual Funds Our Take: Original article here from AllianceBernstein that was sent to Cate for her blog. This gives the flipside to the Nested Interest article above specifically as it relates to muni bonds. Here are the arguments they make against investing in individual muni bonds instead of muni bond funds:
- Now that most municipal bonds are not insured you have to do a lot more research to figure out what it is you are buying if you go the individual bond route.
- If you buy and hold individual bonds to maturity you risk missing out on higher rates.
- Individual muni bonds are normally not very liquid after issue so you can incur a lot of cost if you need to sell them before maturity.
Tweet and Article from @TheArmoTrader
Some Perspective – Great chart here showing what the big “spike” in rates that we have experienced over the last week looks like from a historical perspective. People love to get excited anytime the market moves in one direction or another, especially when the market has been at a very low or high level from a historical perspective like treasuries have. As @thearmotrader points out however, the answer to that question of what the recent move in treasuries looks like when taken in the context of the last few years is “not much at all”.