Buffett Sours on Muni’s…Paying $1 Billion to Borrow $105 Million…and more!

Best of the Bond Market for August 6th, 2012

WSJ: Buffett Cuts Muni Bond Exposure in Half – Berkshire said Friday in its second-quarter financial filing with regulators that it reached an agreement to terminate contracts with a notional value of $8.25 billion, or about half the total outstanding.

Voice of San Diego: Poway Schools pays $1 Billion to borrow $105 Million – It won’t start paying back the loan for 20 years.  During that time the debt will grow and grow as interest piles up. Future taxpayers will pay down the loan over 20 years, from 2031 to 2051.

WSJ: American Fund’s lack of compelling bond funds hurts company performance – Vanguard gaining ground as others struggle.

CNBC: Bond inflows continue despite record low rates – Bond yields are scraping along at record lows, but investors keep buying them, valuing the modest, fixed returns they pay over the bigger potential profits offered by stocks.

Learn Bonds: Fixed income allocation made easy. – How to know which funds to include in your fixed income portfolio.

Bloomberg: The supply of new junk bond issues is not keeping up with demand – The value of new junk bonds is rising by the most in at least three years relative to outstanding debt as low trading volume and faster cash inflows into mutual funds force investors to jockey for initial offerings.

MSN Money: 4 things you should know before buying a municipal bond – 1. How much is the bond really costing you? 2. What kind of bond are you buying? 3. Are you getting the right information? 4. Are you getting quality default-risk information?

Bond Buyer: Municipal bond pricing transparency improvements have resulted in lower prices paid by retail buyers. – After the 15-minute rule took effect, the cost of bonds fell about 50 cents per $100.

Businessweek: Does the return of bond market optimism signal a market top in the making? – Hedge-fund managers and other large speculators had a net- long position in 10-year note futures for the first time since Jan. 23, and reached a record long bet in two-year note futures for the week ending July 31, according to U.S. Commodity Futures Trading Commission data released Aug. 3.

Rajiv Tarigopula: Why bond investors should stop overlooking agency bonds – Because these agencies are not backed by the full faith and credit of the U.S. government, though, they offer a risk premium on yields for investors willing to take a gamble on these semiprivate entities.


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