Gundlach and Gross Turn to Leverage as Yields Retreat…How Institutional Bond Trading Really Works…and more!

 

Bloomberg: – PIMCO to DoubleLine leveraging as yields retreat. – Bill Gross’s Pacific Investment Management Co. said it plans to sell as much as $3.3 billion of shares for its PIMCO Dynamic Credit Income Fund, poised to become the largest taxable income closed-end fund. DoubleLine Capital LP is starting its Income Solutions Fund that may invest an unlimited amount of its assets in speculative-grade debt, according to a Jan. 15 filing.

ZeroHedge: – How bond trading on Wall Street really works. – Do you want to know what goes on behind the scenes of every Wall Street firm in the US and around the world on any given day: Tyler Durden has interesting insight?

CNBC: – Vigilantes or the Fed: Understanding Monday’s bond market dip. – Paul Krugman points out that word from Fitch that a US downgrade is now unlikely because of the debt ceiling has been temporarily suspended seems to have contributed to yesterdays Treasury retreat.

Learn Bonds: – Should dividend investors look at credit ratings? – Dividend investors should definitely look at a company’s credit rating before they invest in the company’s stock. In many cases, the credit rating provides valuable insight into the company’s ability to continue paying a generous dividend in the future. If your top investment priority is the stability of a company’s dividend, Learn Bonds recommends avoiding companies with a credit rating of below A-.

Investment Week: – Are bond markets telling us rates will rise sooner than expected? – GLG’s strategic bond fund manager Jon Mawby has warned investors to be wary of exposing their cash to interest-rate sensitive bonds such as gilts amid a surge in demand for protection.

Bloomberg: – Illinois trails California after pension-fix bungle. – Illinois is losing in the battle of lowest-rated U.S. states as its debt approaches the weakest in at least 18 years relative to California’s.

ETF Trends: – Is the Treasury ETF bull run over? – iShares, the world’s biggest exchange-traded fund company by assets, looks to be planning an expansion of its presence in the relatively unexplored pocket of target-date maturity bond ETFs, with a series of regulatory filings over the past several weeks detailing corporate bond funds that will expire once all the bonds in a given portfolio mature.

Bond Buyer: – BlackRock’s Hayes plays defense with munis for 2013. – Defense, it’s often said, wins football games. It also may be the best strategy for municipal bond investors in 2013, given market conditions. So says Peter Hayes, head of muni-bond portfolio management, research and trading at BlackRock.

Bond Vigilantes: – High yield – it’s pickin’ time. – It’s fair to say that we have been toning down our view on the high yield market of late. We could well see returns in the high single digits for 2013, but the potential for more substantial capital gains is less apparent in today’s context. This does, however, ignore quite a powerful feature of the current high yield environment – the scope for exploiting opportunities and pricing dislocations within the market itself.

Learn Bonds: – Should dividend investors look at credit ratings? – Dividend investors should definitely look at a company’s credit rating before they invest in the company’s stock. In many cases, the credit rating provides valuable insight into the company’s ability to continue paying a generous dividend in the future. If your top investment priority is the stability of a company’s dividend, Learn Bonds recommends avoiding companies with a credit rating of below A-.

Business Insider: – A gap is emerging that shows why the bond market could get crushed. – Lately, stocks have staged a big upward move as perceptions of tail risks in the market have diminished and investors have turned bullish on economic growth prospects. This has Wall Street buzzing about the “Great Rotation,” a big shift out of bonds and into stocks that is becoming widely expected sometime in 2013. But bond yields still haven’t really gone anywhere, and a lot of bond market participants are worried about what will happen when they finally do.

About.com: – 12 types of bonds to know. – Fixed income investors have a wide range of options regarding the types of bonds they can hold in their portfolio. A brief overview of each bond asset class appears below, together with links to specific articles about each of the 12 major types of bonds.

ETF Trends: – How to find the best emerging market bond ETFs. – Individual emerging market bonds are difficult to purchase and come with significant risk. For this reason, investors are turning to ETFs to gain broad exposure to this market. ETFs don’t remove currency, interest rate, and other risk factors inherent to international bond investing, but the diversification that an ETF offers mitigates these risks and can provide lower volatility.

ETF Trends: – TIPS ETFs fall with Treasury bonds. – ETFs that invest in Treasury Inflation Protected Securities, or TIPS, have been falling with nominal Treasuries as bond yields rise. The pullback in TIPS is a reminder that these inflation-indexed bonds can also be hurt by higher interest rates.

Gold Seek: – Why gold and silver would boom in a bond market crash, not equities. – The fashionable talk in financial markets these days is of a ‘Great Rotation’ from bonds into equities, a smooth transition from the largest bond market bubble in history to a more normal balance between equities and bonds. Look at the move out of bond funds and back into equities and there is certainly evidence that this is happening. The problem comes when the bond market finally blows up.

BizJournals: – Bond bubble may be bursting. – The reign of the investment bond may be ending. With yields on 10-year Treasury notes back up to 2 percent — a first since April 2012 — worries about a bond bubble bursting are driving investors out of the bond market.

Zacks: – Top 5 Zacks #1 ranked international bond funds. – The international bond market has come to represent a particularly lucrative opportunity for investors. Though the US bond market continues to attract investors, it has featured infrequently among the best performing international markets.

FT: – No clear-cut answer to bond bubble puzzle. – The ominous upward creep in US Treasury bond yields in recent days leads to the inevitable question. Could this be the beginning of the end of the great bond market bubble? The big jump in US durable goods orders revealed on Monday certainly reinforced the impression that the Federal Reserve may retreat from its unconventional monetary measures sooner than hitherto expected.

Business Insider:  If we want stocks to keep surging, government bond yields need to rise. – Rising profits and improving economic activity are often not enough for market momentum to be sustained. Often the improving environment for equities needs to be mirrored by a deterioration for fixed income investors. We find the first 20% gain in markets is often accompanied with stable bond yields. But for markets to make double digit gains from here we usually need to see core government bonds yields rise by 50 basis points or more.

Reuters: – Detroit edges closer to bankruptcy. – General Motors Co and Chrysler, which along with Ford Motor Co gave the Motor City its identity, survived near-death experiences after filing for bankruptcy during the financial crisis. Now, Detroit itself is edging closer to a similar precipice, only unlike the automakers, its chances of getting a federal bailout are almost nonexistent.

Charles Margolis: – Hertz bonds yield 6.4%. – Call protected Hertz bonds currently boast an impressive 6.4% yield on the secondary market. These particular bonds are rated lower than other Hertz bonds; Check out how they compare to other auto rental, sales and service companies.

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