Best of the Bond Market for July 13th, 2012
Bloomberg: Buffett Says Muni Bankruptcies Set to Climb – Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc. (BRK/A), said municipal bankruptcies are set to rise as there’s less stigma attached after three California cities opted to seek protection just weeks apart.
the oracle is doubling down with his thesis on a “terrible problem” in muniland….his worst call of his career as muni returns beat stocks
— Michael Pietronico (@MillerTabak) July 13, 2012
The Big Picture: UBS Says Not all municipalities are the same – Some are healthy, some are middling, and a some are in various degrees of distress. “Most city governments are performing reasonably well in spite of the financial challenges posed by lower property valuations, rising employee benefit costs, and lower state aid.”
NY Times: Bankruptcy in California Isn’t Seen as a Trend - As San Bernardino, Calif., moved toward bankruptcy this week, municipal bond analysts were questioning how widespread the fiscal distress may prove to be, but were not predicting a wave of defaults.
The Sacramento Bee: Dan Walters: California just as insolvent as bankrupt cities – For years, governors and legislators have squandered brief revenue windfalls on permanent spending and tax cuts, passed budgets based on whimsy, ignored liabilities (especially pensions and retiree health care), and covered resulting deficits with ever-more-elaborate accounting tricks and borrowing.
Lord Abbett: Municipal Bond Market Update Video – Muni market has not been as volatile as the treasury market. On the state level municipal finances are actually improving. Supply has picked up in june and in this year in general as a result of refundings. He likes the long end of the yield curve.
Boston Review: Huge InfoGraphic on the Stockton CA bankruptcy
Learn Bonds: Bond Mutual Funds or Bond ETFs? – f you want a passively managed bond fund, then Bond Index Funds and Bond ETFs are very similar creatures for long term investors. Ultimately the decision is going to come down to cost.
Bond Squawk: Bank of America Says QE3 Coming in September – “We expect that the outlook will be weak enough to warrant additional Fed easing by the September 12-13 FOMC meeting; we look for Fed officials to both push out their forward guidance on rates until at least mid-2015 and to launch QE3.”
Yahoo Finance: Why Investors Shouldn’t Count on QE3 – The Fed: We’re going to keep doing what we’re doing, and if things get significantly worse, we might possibly potentially consider thinking about doing something else.
Wall Street Pitt: The Bond Markets Have Priced in the “Economists” – Ten year bonds yield about 1.5% and the 30 year bond yields about 2.6%. That can only mean one thing; the bond market expects low NGDP growth for as far as the eye can see. They understand that any pickup in NGDP growth would lead the Fed to tighten, and we’ll drop right back into the slow growth track.
Index Universe: Is PIMCO’s BOND ETF a Buy? - Since inception, the four-month-old ETF returned 7.25 percent through July 11, while the mutual fund has just climbed 3.82 percent.
The Big Picture: 5 Tips for Bond Investors from Barry Ritholtz 1. Ladder 2. Independant Credit Risk analysis 3. Bond ETfs/Indexes if you can’t afford ladder 4. Yield/Income portfolio involves more risk 5. Bond Funds have diff risks than bonds.
Surly Trader: The Deleveraged Consumer - As US consumers have paid off revolving credit card balances and been freed from large amounts of housing debt through foreclosures and short-sales, the average US household balance sheet has been deleveraged.
— Debtwire Municipals (@Debtwire_Munis) July 13, 2012
Gross: Swiss, German and Dutch 2 – 3 year bonds sell at negative yields. I prefer a mattress.
— PIMCO (@PIMCO) July 13, 2012
ziegler: Demand extremely robust. Sellers able to demand big numbers. HY in demand as supply can’t come close to matching market demand
— Taylor Riggs (@TaylorRiggs_BB) July 13, 2012
— Cate Long (@cate_long) July 13, 2012