Bill Gross Bets on Mexico…San Bernardino Files….a Crazy Auction…and More!

Best of the Bond Market for July 11th, 2012 

Learn Bonds: Bill Gross is Betting on Mexican Bonds. Here’s Why. - The ETF version of the the PIMCO Total Return Fund (BOND) has an incredible 10.34% of its market value in Mexican Bonds.  That is second only to US Bonds in terms of position sizing.

MarketWatch: Municipal bonds discount San Bernardino bankruptcy - Municipal bond investors on Wednesday shrugged off the move by San Bernardino, Calif., to file for bankruptcy as the broader market continues to perform relatively well, indicating investors understand these things will occasionally happen.

CNBC: As More Cities Go Broke, Is Muni Crisis Finally Here? - “There is risk and there are likely to be more bankruptcies and defaults,” says Peter Coffin, president of Breckenridge Capital, a Boston-based firm that manages $13 billion in assets and has a dozen analysts devoted solely to the municipal space. “I don’t think it’s systemic, but it’s a greater risk than most municipal investors have been accustomed to in their lifetimes.”

Barrons: Muni Defaults Down at Midyear, State Budgets On Time - Despite an ongoing recession and housing slump, the muni bond market isn’t looking half bad through the halfway mark of 2012, and things are looking pretty good at least for the next two months.

Bloomberg: BofA Lifts Bank Bonds to Best Returns of 2012 – Bank of America Corp. (BAC) and Lloyds Banking Group Plc (LLOY) lead 8.1 percent returns on dollar-denominated bank notes since year-end, versus 5.4 percent on non-financial bonds, according to Bank of America Merrill Lynch index data. Last year, bank bonds were the worst performers, gaining 1.71 percent.

MorningStar: Emerging Market Bonds Breakdown – Overview of the most popular emerging market bond mutual funds and ETFs.

Rajiv Tarigopula: Taking A Look At Citigroup’s Latest Fixed-Income Prospectus – I’d stay away from this bond offering for the time being. Investors looking for income opportunities may find it worthwhile to check out Citigroup’s peer firms in the same general industry, whose fundamental metrics may be a bit weaker but whose fixed-income offerings may consequently offer higher yields.

Bond Squawk: Seasonals on the 10 Year Treasury Suggest Retest of Lows – “With seasonal turning bullish (10s have rallied for 6 consecutive Julys and 8 consecutive Augusts) a break of 1.43% opens 9yr channel resistance at 1.39% while ultimately we could see a move to 1.00% before longer term signs of basing emerge.”

The Big Picture: Today’s 10 Year Auction was Off the Charts – The when issued was almost 5 bps below the when issued and the bid to cover of 3.61 was well above the previous 12 month avg of 3.09. Furthermore, direct bidders took a whopping 45.4% (vs 20.8% in June, 15.8% in May and 11% in April) of the auction which combined with the 40.6% from indirect bidders, dealers got only 14%, the lowest I’ve ever seen.

iShares: Infographic: Breaking Down the Risk vs. Return Potential of 5 Bond ETFS

Reuters MuniLand: Did the police and fire departments sink Stockton? - How does a bankrupt city pay its public safety workers twice the median household income of the area’s residents? More important, why haven’t the city manager and council stopped this wage bonanza?

 

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