Best of the Bond Market for June 27th, 2012
Bloomberg: Stockton, California, To File For Bankruptcy Protection – Stockton, California, said it will file for bankruptcy after talks with bondholders and labor unions failed, making the agricultural center the biggest U.S. city to seek court protection from creditors.
WSJ: The Stockton Bankruptcy: Should Investors Be Worried? – Matt Fabian, managing director of research firm Municipal Market Advisors, doesn’t find that particularly surprising. Yesterday, he noted in a report to clients that he doesn’t “expect negative market action [to] follow the filing; the city’s situation has been well discussed in the industry and the media and it does not appear as precedent to additional filings by other CA cities in the near term.”
Property Casualty 360: Bond Insurers, Investment Portfolios Should Weather Stockton Bankruptcy – The largest city to file for bankruptcy protection in the United States will not spell doom for municipal-bond insurers, and only a dramatic rash of municipal failures would do serious damage to that industry segment, an economist says.
ETF Trends: Risks of Muni Bond ETFs – Issuers are lowering the safeguards in the tax-free municipal bond market, taking advantage of increasingly high demand for munis in a low yield environment.
Learn Bonds: Muni Investment Idea: Consider Taxable Munis – This month both Breckinridge Capital Advisors and Janney Capital Markets published articles in favor of Taxable Municipal Bonds. Overall, they are both very bullish on these bonds
MorningStar: Our Outlook for the Credit Markets – we think that barring a complete financial meltdown in Europe or an especially hard landing in China, interest rates have likely bottomed out and should head higher over the medium term to provide investors a real return over inflation.
FT: Why German Bonds are no Big Short – Germany, also a creditor, external-surplus nation, with a deleveraging banking system may be no different than Japan.
Index Universe: Playing Against the House – Investors in a cap-weight sovereign bond index fund are, in effect, allowing the house to set the rules. They place their largest allocations into the countries with the largest debt burdens, where these problems will be most prevalent.
ETF Trends: Are Treasury Bond ETFs the New Tech Stocks? – “You look at the 10-year yields around the world and the U.S. is somewhere in the middle so it’s hard to say this is a full-blown bond bubble when there’s so much more to go,” added FusionIQ’s Ritholtz. “The U.S. is in the middle of bond yields for industrialized nations. You could get a lot less in yield.”
Market Watch: U.S. gets weak demand for 5-year sale; bonds fall – The Treasury Department sold $35 billion in 5-year notes on Wednesday at a yield of 0.752%, higher than traders expected due to weak demand from investors. Bidders offered to buy 2.61 times the amount of debt sold, down from the average of 2.96 times at the last four auctions.
BlackRock: Think Your Traditional Fixed Income Portfolio is Safe? Think Again. – Flexible fixed income strategies that seek to capitalize on market opportunities, while also managing duration and credit risk, should be a core holding in a diversified fixed income portfolio.