Top 14 Bond Market Stories for May 2nd, 2012

Random Roger: How to Minimize Fixed Income Portfolio Risk  – An Explanation of spreading things across many different segments of the bond market as a way to reduce certain types of risks. Risk can’t be eliminated of course but the potential impact can be minimized somewhat.

The Financial Lexicon: My Most Recent Fixed Income Purchases – Looks like he likes energy: Peabody Energy, Chesapeake Energy, CONSOL Energy, Ball Corp., and Bank of America. He also says: …it should be noted that my corporate bond portfolio currently consists of 39 different companies and more than 39 different CUSIPs. Only 10 of those companies have at least one non-investment grade rating.

MarketSci Blog: EconomPic’s Seasonality StrategyThis is a test of EconomPic’s seasonality strategy, a variation on “sell in May and go away”: go long the S&P 500 the 6 months from November through April, otherwise go long government/investment grade bonds.

Fidelity: High Yield Lives up to Its Name – Few intersting points from the article:

  • the benchmark index for high-yield bonds still runs in the mid-6% range and the mid-5% range for higher-quality BB-rated bonds.
  • Recently the default rate was 2.8% for all high-yield bonds in the U.S., and near zero for BB-rated bonds—well below the historical average.
  • When interest rates move higher, bond prices tend to fall. In high-yield bonds, though, the wide spread with government issues may act as a cushion.

Hannah Arendt Center: Pension Crisis Primer (h/t Cate Long) –  According to government numbers, the shortfall is $800 billion…. many private economists estimate the shortfall at around $4 Trillion. Big difference is different assumptions made on returns on investment between the two groups.

Fidelity: 100 Year Bonds on the Horizon? – Great chart in this article comparing the maturity profiles of different major economies debt.  US is listed at 5 years which is the lowest of the group compared to the UK which was the highest at 14.7 years.

Fox Business: Chesapeake Bonds TumbleThe price of its 9.5% coupon bonds due 2015 dropped $2.94 per $100 of face-value to $106.375. Before the story of McClendon’s (Co Founder and CEO)  financial dealings broke on April 18, the bonds traded at $113.500.

Index Universe: PIMCO’s BOND Makes Top 10 ETF’s List for April Inflows Bill Gross’ Pimco Total Return ETF (NYSEArca: BOND) was the 10th-most-popular ETF last month…While net flows in April, led by bond funds, were positive to the tune of $3.37 billion, weaker stock prices helped pull total U.S-listed ETF assets down 1 percent to $1.198 trillion.

Bond Buyer: Data Shows Changes in Muni Buying PatternsWhile individual investors — the primary owners of municipal debt — have generally increased their holdings in the last 10 years, some institutional investors have trimmed their holdings and others have been aggressive buyers.

@RochesterFunds Tweets: Illinois successfully issued its largest ever tax-exempt issue Tuesday, $1.8 billion of GO refunding bonds. In fact, it was oversubscribed.

WSJ: Bond Market is Creating a New Galaxy for Trading The result {of new regulations} has been a collapse in the amount of bonds held in Wall Street’s cellars. Dealers’ inventories of corporate bonds nearly halved in the past 12 months, according to Tabb Group, to around $47 billion, their lowest level in a decade and some 22% below the crisis-time nadir. Trading costs have spiked as a result and the lure of juicy revenues and the need to replenish lost liquidity is prompting other players to try to fill the void.

The Nest: 5 Reasons to Stay in Municipal Bonds – 1. Tax Advantages, 2. Lower Default Risk, 3. Stability, 4. Diversification, 5. Flexibility.  

Peter Tchir: May Fixed Income Allocation Breakdown – They give a breakdown of their thinking on each of the following allocations in the article:
Treasuries 0%, TIPS 5-10%, T Bills 35 to 40%, High Yield Bonds 15%, Leveraged Loans 15%, Investment Grade 0%, US Financials 5%, Munis 10%, Emerging Markets 5%, Other Sovereign Debt 0%, RMBS/CMBS 5%.

WSJ: New Bond Issues Find a Home as Risk RalliesCorporate-bond deals are coming out of the woodwork to take advantage of investor demand and borrow at rates that are again near all-time lows. At least $3.125 billion of high-grade debt found a home Tuesday, starting May off on the right foot after a mostly-quiet April.

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