Bernanke to Congress: “Don’t Mess Me Up”…and More!

Best of the Bond Market for June 7th, 2012

FT: Bernanke Cautious Over Further ActionBen Bernanke dashed market hopes that the Federal Reserve is about to unleash another monetary stimulus as he made a strong plea for Congress to take action on fiscal policy.

FT: Doubts over Corporate Bond ETFs – Both HYG and JNK ETFs have diverged by three percentage points from the indices they track. ETFs sponsors say this is because the funds respond to changes in demand faster than indices. But some investors say the ETFs are sending incorrect pricing signals. “In the high yield market it is difficult to put large amounts of money to work quickly,” said Greg Hopper, a senior portfolio manager at Artio Global Advisors, which does not use ETFs.

ETFReplay: Chart of Bond ETFs Performance Since QE Began – The Federal Reserve has made a lot of money on its Treasury Bond purchases.  However, that is dwarfed by what high-yield bond investors have received over the last few years.

Dollar Skeptic: 7 Reasons “Inflation Protected Bonds” aren’t – 1. There’s no such thing as a free lunch. 2. Inflation-protected bonds don’t protect you from inflation. 3. Bond prices are manipulated by the Federal Reserve. 4. The Tax Man 5. Bond bubble: TIPS are not an inflation hedge. 6. Bonds are essentially a Ponzi-like scheme 7. Treasury bonds are only a good investment in two unlikely scenarios

Reuters MuniLand: Virginia For Sale – he governor and Sean Connaughton, the head of the Department of Transportation, appear to be racing to move as many of Virginia’s public assets into private hands as possible….This is unfortunate because Virginia’s governor has a history of undertaking privatization projects that net rich returns for investors but are of unknown value for taxpayers.

Forbes: A Plan to Improve ETF Dividend Reinvestment  – Precidian has proposed a distribution reinvestment program that will reinvest at Net Asset Value. Currently, dividends from ETFs are reinvested at market prices, without regard for premium or discount, and only if the custodian and broker offer such an option.x

Advisor Perspectives – St. Bernanke’s Fight against the Deflation Dragon – The historic low yield on government treasuries is clear evidence that hyperinflation is not a threat. Unfortunately, for Ben Bernanke and the Administration, inflationary pressures are not evident either. The reason that I say “unfortunately” is that inflationary pressures are a sign that the economy is gaining strength. For all the money that has been spent trying to ignite the engine of economic growth, it has all remained a futile effort at this point. But are we slowly winning the fight against the dragon?

View from the Rope: Video Interview With Marc Joffe on Open Source Credit Ratings

WSJ: Pressure Grows as Fitch Downgrades Spain – Pressure for a European Union plan to recapitalize Spanish banks intensified Thursday after the Fitch Ratings agency lowered its investment-grade rating on Spain by three notches, saying European policy missteps have aggravated the country’s economic and financial challenges.

IPREO: Next Week’s Muni Deal Calendar

Michael Terry: Nokia Bonds Holding Firm – For those investors who currently hold Nokia equity or are considering starting a position, the bonds are supportive of the stock. Similar to my last article, if you feel Nokia has what it takes with its new line of handsets and its Microsoft (MSFT) connections (via the payment to put Microsoft’s OS on the handset and potential further support), the bonds look stable here and a bond plus call strategy could be used, a bonds alone strategy or straight equity.


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