Best of the Bond Market for August 9th, 2012
Reuters MuniLand: Are you a CA city that wants to go bankrupt? There’s now a guide for that. - The report provides the mechanics for assessing whether a municipality qualifies as “insolvent;” how California’s mediation process, AB 506, works; and what happens after the bankruptcy paperwork is filed. For most municipalities the largest area of spending is wages and benefits for employees, and the report addresses both.
Zero Hedge: Junk bond pro’s are selling into retail exuberance – 8 reasons why there is more selling coming in the high yield market.
Investor Place: A bit of patience may be in order for high yield bond investors - Although the asset class has an outstanding long-term track record, the current risk/reward profile indicates that investors should be well served by exercising a measure of patience.
Learn Bonds: Relative to Investment Grade, High Yield Bonds are Still a Screaming Buy – if you are going to be in bonds, there is a strong argument that high yield is still the place to be.
BondSquawk: Top 5 high quality corporate bonds for individual investors – Walmart, Pfizer, GE, Merck, Procter and Gamble.
The Big Picture: On the back of a soft 10 year treasury auction yesterday, today’s 30 year auction was soft as well. - The yield of 2.825% was 1-2 bps above the when issued and the bid to cover of 2.41 is below the previous 12 month average of 2.64 and the 2nd lowest since Aug ’11. Also, dealers got stuck with the most amount in the last 4 months of auctions.
Bloomberg: Issuance is up but corporate bond trading volumes are way down since 07 causing headaches for bond investors. - New issues of $829 billion this year are up 14 percent from the same period of 2007, according to data compiled by Bloomberg. Trading of the securities among the dealers has dwindled to an average of about $95 billion a day this year from more than $235 billion in all of 2007, Fed data show.
WSJ: The bond market is finally starting to discover computers and the internet – Morgan Stanley’s head of interest-rate trading, Glenn Hadden, has told colleagues in recent months and that the trading floor of the future will surround a few traders with the hum of powerful machines.
Business Insider: Money Manager David Kotok slams Meredith Whitney – We entirely disagree with Meredith Whitney, who persists in predicting that this world of state and local government finance will end in disaster. We say it won’t. In Maine, we can point to a concrete example.
BCA Research: Deleveraging is going to continue for quite some time – Housing debt, which accounts for four-fifths of all household debt, currently stands at about 60% of the value of the residential housing stock, still well above the pre-bubble level of 40%.
For a bad 30-yr Tsy auction, nice rally since then $$
— David Merkel (@AlephBlog) August 9, 2012
Is there more confidence and conviction in the bond selloff or the equity run?
— David Schawel (@DavidSchawel) August 9, 2012
Credit risk in the muni market is not difficult to spot. If there is a privately placed component, it’s probably questionable.
— Bond Girl (@munilass) August 9, 2012
PIMCO: capital flows signaling new storms threatening Europe.
— no bid. (@cr3dit) August 9, 2012
HY companies are very smart about issuance if they sense their window to issue is narrowing.
— JunkBondMom (@junkbondmom) August 9, 2012
According to MNI this week’s corporate issuance is $22.1B through Wed; and it’s being well recieved. What a contrast to #munis w/ ~$5.9B WTD
— Muni Market Advisors (@Muni_Mkt_Advis) August 9, 2012
10 year breakeven vs SPoosyfrog.com/oca5tg
— Ed Bradford (@Fullcarry) August 9, 2012