Think You Can Better Manage Government Spending? Prove it.

Best of the Bond Market for April 26th, 2012

WSJ: Crowdsourcing a Debt Crisis Solution – Think you can do a better job than the government at cutting deficits and stabilizing the national debt?  Now you can prove it using this tool.

Smart Money: When Muni Bonds Run Dry – Forget about whether municipal bonds, a staple of many fixed-income portfolios, could be a long-term problem. Experts say investors face a much more pressing concern: a shortage of the bonds themselves.

Morningstar Video: Take Care With Core Bond Exposure – Core Bond Funds have generally tracked the Barclays US Aggregate Bond Funds index.  Since the financial crisis however a lot of core bond funds have started to move away from the index.  Where 90% of the performance of funds like the The PIMCO Total Return Fund used to be attributed to movements in the index, now its more like 30% for this and a lot of other funds.  There are two primary reasons why:

  1. Government Debt has exploded since the financial crisis so most managers now feel that it represents too large a portion of the index.
  2. 2. Since rates are so low many managers are adjusting their duration in order to protect against a rising rate environment.

iShares Video: 3 Reasons to Consider Emerging Market Bonds

  1. Emerging markets have become more stable at the same time developed market have become less stable. Emerging market debt should therefore be less volatile.
  2.  There is a significant pickup in yield about 3.5% over US Debt.
  3. You are getting that higher yield with improving fundamentals.  Debt in emerging market economies has been dropping relative to what their economies produce.  Developed markets are going the other way.

Bond Buyer: Baucus: Consider Alternatives to Tax-Exempts – Tax-credit bonds are the only type of bonds that provide investors with uniform subsidies. The bondholders receive tax credits from taxable bonds, but Baucus never mentioned them. He talked about a successful BAB financing in Montana. Baucus’ remarks, instead, seemed to refer to the claim by some economists that tax-exempt bonds are an inefficient mechanism for the federal government to transfer funds to state and local governments.

—->@MillerTabak Tweets: if the possibility exists that the tax exemption can go away on munis then “accumulate” – would you move out of a rent controlled apartment?

—->@RochesterFunds tweets: The Committee’s discussion about muni tax exemption looks like a non-starter to us; the topic is often raised, but has never led to a change

Fox Business: Are there still Opportunities For Investors in Municipal Bonds?  – still opportunities in municipal bonds.  Not as great as they once were, no double digit returns this year but solid core performance.  They do not believe there is going to be a bankruptcy of any large municipal issuer anywhere in the nation.  They are overweight in essential service revenue bonds.

Business Insider: Meredith Whitney: State Finances Are Still Doomed, And These Three States Are In The Most Trouble – Meredith Whitney says there are three states in particular she doesn’t like: California (which is the worst) followed closely by Illinois and New Jersey.

Reuters MuniLand: Does the Market Trust Corporate Issuers More? – Lack of standardization and poor disclosure in the market means investors require a higher tax equivalent yield than for similarly rated corporates.

Lord Abbett:  Lower-Tier Investment-Grade Municipal Bonds Offer Value – State and local government revenues are on an uptrend while at the same time Investment Grade Muni Yield Spreads remain high.

Bond Buyer: Muni’s Steady Despite Leftover Supply – The tax-exempt market was steady Thursday morning but traders said an abundant amount of supply could force price cuts soon. “Munis are kind of flat, but a lot busier,” a New York trader said. “There are lots of bonds around.”

CNBC: Fed Doing More Harm Than Good: Boockvar – “The Fed has created a tremendous bond bubble and that comes after the stock market bubble that they created in the early part of the decade, the credit bubble that they created in the middle part of the decade. And now we have an epic bond market bubble,” he said.

Bloomberg: Bernanke Takes On Krugman’s Criticism Ignoring Own Advice – “The question is, does it make sense to actively seek a higher inflation rate in order to achieve” a slightly faster reduction in the unemployment rate, Bernanke said yesterday to reporters after a Federal Open Market Committee meeting. “The view of the committee is that that would be very reckless.”

Miami Herald: Miami considers selling advertising space on public buildings, fire hydrants, rights-of-way  – City attorney Julie Bru said Wednesday that the city would not seek to nail ads to trees, and added the measure might require “changes’’ to clarify the types of fixtures to which ads could be attached.

WSJ: Moody’s Rating Business Grows On Bond Rebound But Company Wary – Investment-grade volume has softened significantly in April…the speculative-grade pipeline, however, is “reasonably strong” following a solid performance in the first quarter. Weakness in speculative-grade bonds and loans had encumbered Moody’s Investors Service in the second half of last year, when profit also fell.

Market Watch: BondDesk Wins Prestigious Nielsen Norman Award for BondWorks – Launched in 2011, BondWorks represents one of the most advanced and intuitive platforms ever developed specifically for, and in close consultation with, the financial advisor community.

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