PIMCO Gets Weird…Moody’s “Meh”…What the Bond King is Buying…and more!

Best of the Bond Market for June 22nd, 2012 

FT: Moody’s downgrade hits 15 top banksFifteen of the biggest global banks were downgraded on Thursday by Moody’s Investors Service, adding to pressure on their borrowing costs and questions over their business models.

Sober Look: Ratings Agencies Will Become Less Relevant for Bank Risk – Over time rating agencies will become less relevant for large bank credits as all major banks involved in capital markets will converge to roughly the same rating.

Business Insider: PIMCO Is Tweeting The Most Convoluted Nonsense These Days

Economic Musings: What Bonds is Bond King Jeffrey Gundlach Buying?DoubleLine added over $1bil of newly issued 20yr 3.5% pools and nearly $700mil of 30yr 4% jumbo pools.  The 3.5% pools are borrowers with a rate of ~4%.  Looking at total issuance for May, it appears DoubleLine bought about 1/3rd of the total issuance of these bonds.

MarketWatch: Treasurys fall after ECB eases rules – Yields on 10-year notes 10_YEAR +2.95% rose 5 basis points to 1.67%, after being down slightly through the Asian and European sessions.  Yields on 30-year bonds 30_YEAR +2.53%  added 6 basis points to 2.75%. Five-year yields 5_YEAR +3.14%  increased 3 basis points to 0.7%.

The BondDad Blog: Inflation is Definitely Under Control — And Is Actually Signaling Bad Things -from a consumer’s perspective this is good because it means we’re not under a threat of massive inflation.  But it also means a slowing economy.  Finally, the last time we saw this alignment was before a recession — definitely not a good development on the statistics front.

Learn Bonds: Does Technical Analysis Work for Municipal Bonds?  – If you find value in technical analysis when analyzing other markets then you can use it in a broad sense in the municipal bond market as well.  However, the lack of consistent price data makes it less of an exact science as it would be for other markets.

WSJ: Tip for Treasury Investors: Follow the Fed’s Twist – In the Treasury bond market, replicating the Federal Reserve’s portfolio allocations has proved to be an attractive trade, and many analysts believe it could have staying power for the months to come.

Rolling Stone: How America’s biggest banks took part in a nationwide (municipal bond) bid-rigging conspiracy – The banks achieved this gigantic rip-off by secretly colluding to rig the public bids on municipal bonds, a business worth $3.7 trillion.

STL Today: Total IL Deficit Nears $44 Billion – The state’s overall deficit climbed to nearly $44 billion last year, easily the worst in the nation, the Illinois auditor general reported Thursday.  The red ink grew by 16.8 percent in a single year, Auditor General William Holland said.

Reuters: High Yield Muni Buyers Lose Safeguards “We’re getting into the place where it’s an issuer’s market, the covenants, the types of reserves, the collateral provided, do not make the structures as attractive,” as they previously were, said Michael Walls, a portfolio manager with the Ivy Funds in Overland Park, Kansas.

Zacks Investment Research: Top 5 Highest Yielding Zacks #1 Ranked Municipal Bond Mutual Funds

Kraken: ATP Oil And Gas: Sell The Stock, Buy The 24% Bonds – Bottom line is that there is a possibility of ATPG going bankrupt. The equity should be for those with a high risk appetite. With the bond, investors can get a 24% yield, while expecting a limited downside in event of a restructuring.

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