Pros Still Betting on Junk Bonds…FOMC Minutes….and more!

Best of the Bond Market for August 22nd, 2012

CNBC: Why the pros are still Betting on junk bonds. – With experts warning the junk bond market is becoming overheated, you might be surprised to learn some traders are still betting on them. So who’s right?

WSJ: FOMC Minutes suggest growing support for further action – “Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery,”

Barrons: Fund managers say emerging market bonds will continue to outperform – as capital leaves Europe and interest rates in much of the developed world linger near historic lows and appear headed lower, strategists and fund managers say the opportunity will likely continue.

Learn Bonds: JCPenny stock and bonds are telling different stories – which is right?

Bloomberg: PIMCO trims asset management target. – PIMCO is now targeting annual asset growth of between 5% -10% down from the previous target of 10%. Jay Ralph who heads up Allianz Asset Management said, “Today’s market environment won’t allow the same level of market performance as in the past”.

BondSquawk: Trades from the trenches might explain rise in treasury yields. – The day to day trades between various bond players partly contributed to the recent increase in treasury yields, this may mean the rise in yields could be short lived.

Bloomberg:New Mexico faces higher borrowing costs as state lending agency cancels bond sales. – $145 million of bond sales were cancelled by the state lending agency after officials discovered the agency’s 2011 financial audit had been falsified. Moody’s and Standard and Poor’s have put the agency’s ratings under review for possible downgrade as investigations continue.

ETF Trends: Are high-yield bond ETFs a disaster waiting to happen? High-yield ETFs have seen record inflows of $43 billion so far this year. But some experts are warning the market is overheated and some junk bond ETFs are showing poor value for money.

Marketwatch: Investors should take a breath before deciding to follow Buffett out of Muni’s – it may be unwise to read too much into Buffett’s move about the state of muni bonds, pros say. His decision to stop using credit default swaps to back munis, which would require him to pay up if a bond defaulted, could have more to do with waning interest in such insurance contracts than with the credit quality of the muni bonds themselves.


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