Gross Blasts El-Erian for Silence and Today’s Other Top Stories

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Bill Gross, manager of the worlds largest bond fund, PIMCO Total Return (TLT) and chief executive of fund giant Pimco has blasted former co-chief executive Mohamed El-Erian live on Bloomberg TV.

The longtime money manager who co-founded Pimco in 1971, said he was surprised by El-Erian’s silence on the issue. Gross dismissed suggestions that El-Erian left because of personal disagreements with Gross. Saying he was disappointed by El-Erian’s silence on the matter.

Gross said, “It would have been helpful from my standpoint and the companies standpoint for Mohammed to have spoken up and to have cleared the air and supported the company he has so proudly help build this last [six years]. And, you know he hasn’t, and thats a mystery to us and quite frankly an extreme disappointment.

The comments come after a month of intense scrutiny, in which Gross’s personality became the focus of financial markets. El-Erian’s departure in March was quickly followed by rumours about a bust up with Gross, including this scathing Wall Street Journal article that depicted Gross’ managerial style in an highly unflattering light.

The upheaval comes at a critical time for Gross, who is trying to appease investors who have yanked a record $41.1 billion from Pimco’s Total Return Fund during 2013, after it posted its worst performance in nearly two decades.

Later in the day the story took another twist. Reuters are reporting that Mohamed El-Erian is unable to respond to Gross’s accusations because of a strict non-disclosure agreement he made with Pimco, according to two sources familiar with his thinking.

The sources close to El-Erian say that it shouldn’t be a mystery to Gross as to why El-Erian, left the firm in March. If breached the NDA, could put any compensation package he received on his departure in jeopardy and potentially open him up to a lawsuit from Pimco, they said.

However, we may not have to wait long for an answer, because those same sources say that El-Erian’s NDA is set to expire in May. Whether he chooses to answer Gross’s accusations then, remains to be seen. But if this whole messy episode is anything to go by, El-Erian’s departure from Pimco was anything but amicable.

 

Todays Other Top Stories

Municipal Bonds

ETF.com: – Build America muni bond ETFs hot for no. – This blog is the first in a series of quarterly reviews on the state of the fixed-income ETF market. Each will focus on one fixed-income ETF category as defined by ETF.com’s ECS methodology and provide an overview of the state of the category and performance comparisons. The best-performing ETF from the best-performing focus/niche will be selected for further analysis of performance drivers.

Reuters: – High-yield drives $273.8 million U.S. municipal fund inflows. –  U.S. municipal bond funds reported $273.8 million of net inflows in the week ended April 9, a sharp reversal from the $81.3 million in outflows the previous week, according to data released by Lipper on Thursday that showed investor appetite for debt with high yields continues to grow.

Bond Buyer: – Citi analysis shows bank regulators that most munis are liquid. – Citi bankers are urging bank regulators to treat most municipal securities as high quality liquid assets in a banking rule proposed to ensure banks are equipped to handle severe financial and economic stress.

CNBC: – Investors grasp for yield with bond buys. – Recent strong demand for relatively risky bonds adds to the case that investors are reaching for yield, meaning they are willing to bet more on lower returns in the absence of other options.

ETF Trends: – Muni Nation: Mazzilli’s municipal musings – Part 2. – At this time, I believe the underlying market for municipal bonds looks favorable. Federal spending cuts, in my opinion, are not likely to affect municipal credits, and the U.S. economy continues to grow at a moderate rate, which is good for municipals.

Bloomberg: – Illinois bond cost lowest since ’09 shows stability. – Illinois obtained the lowest borrowing cost since 2009 in its latest general-obligation deal, a sign that investors expect the state’s credit rating to stabilize after seven downgrades in four years.

Businessweek: – Barclays sees munis extending best rally as Citigroup says sell. – The biggest municipal-bond rally in five years, which dropped yields to near the lowest since June, has Barclays Plc and Citigroup Inc. differing on which direction the $3.7 trillion market will move next.

 

Income Investing

LearnBonds: – Three safe, little known high yield stocks. – Are you frustrated by the lack of high yield stocks in all the safe, well-travelled corners of the world of bonds you’re used to visiting?  Well, just like relatively undiscovered vacation bargains you hear about every once in a while, there are regions of the financial markets that offer deluxe yields with surprisingly low risk that remain known only to the cognoscenti.  Here’s my guide to two of them.

 

Treasury Bonds

Reuters: – 30-year yield falls to lowest since July. – The yield on U.S. 30-year Treasury bonds fell early on Friday to its lowest level since last summer as growing losses in U.S. stock index futures, after disappointing results from U.S. bank giant J.P. Morgan, stoked safety bids for government debt.

Bloomberg: – Treasuries head for biggest weekly gain in month on rate outlook. – Treasuries headed for a weekly gain, with 10-year yields dropping the most in a month, after the Federal Reserve damped speculation policy makers are preparing to raise interest rates.

 

High Yield

Forbes: – High yield bond funds see $640M investor cash inflow. – Retail-cash flows for high-yield funds were positive $640 million in the week ended April 9, with the exchange-traded segment influence just 32%, or $203 million, according to Lipper. The inflow follows last week’s $493 million infusion, which was ETF-heavy, at 69% of the total.

IFR: – Chesapeake leads US$6bn US high-yield charge. – The U.S. high-yield bond market was flooded with US$5.99bn of deals on Thursday, that included less well-known opportunistic issuers looking to push out maturities and jumbo refinancings for Chesapeake Energy Corp and Consol Energy.

MoneyNews: – Junk bond rally sparks concern of bubble. – Junk bonds are flying high, with the Barclays U.S. Corporate High-Yield Index generating a return of 3.36 percent so far this year and 7.42 percent for the past 12 months.

MarketWatch: – Junk bonds haven’t been this overvalued for this long since before Lehman: Martin Fridson. – Martin Fridson doesn’t hesitate when he calls the junk bond market extremely overvalued.

 

Emerging Markets

Reuters: – Emerging market revival no signal to fill your boots. –  Institutional investors are being selective in their return to emerging markets after a heavy sell-off, as there are too many pitfalls for a long-term portfolio to make a winning strategy out of simply buying cheap.

Zacks: – Emerging market ETFs see inflows: 3 ETFs to pick. – Though the emerging market space has been the worst hit over the past one year on Fed tapering and interest rate hike concerns, it has shown tremendous strength in recent weeks. This is particularly true as investors are dumping high growth stocks like technology and biotech in favor of cheaper stocks.

 

Investment Strategy

Invesco: – Why today’s environment favors active high yield strategies. – Fixed income investors are looking for ways to prepare their portfolios for rising interest rates. While bond prices generally fall when rates rise, history shows that high yield bonds have typically held up well in rising rate environments.

Chris Ciovacco: – The case for slower growth, low rates and income investments. – Relative weakness in consumer discretionary and retail stocks is indicative of increasing concerns about future economic outcomes.

FT: – JPMorgan misses targets as fixed income hit. – JPMorgan Chase had its worst start to the year in fixed income trading since the depths of the financial crisis, causing the largest US bank to report a sharp decline in profits.

Glyndon Park: – Retirement Portfolio Strategy: Diversification, high yields, and low risk with 9 ETFs. – We have constructed a model retirement portfolio seeking to maximize current income while maintaining prudent diversification to various asset classes and geographic exposures.

 

Bond Funds

STL Today: – Bond market calms down after last year’s taper tantrum. – The Federal Reserve roiled the bond market last year with talk of tapering, but its actions have proven to be less scary than its words.

Donald van Deventer: – The 20 best value bond trades with maturities of 10 years or more. – We find that 77 bond issues met our trading volume criterion of $5 million or more. The best-value non-call senior fixed rate bond trades with maturities of 10 years or more on April 9, 2014 were issues by these firms.

 

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