Howard Marks on Distressed Debt….Moody’s Defied…and More!

Best of the Bond Market for June 25th, 2012 

Distressed Debt Investing: Howard Marks on Distressed Debt - What do we, as distressed debt investors do, that gives us an advantage over most? 1) We never invest in companies where things are going well and investors are enthralled = we buy at lower prices 2) We invest after problems have already emerged = less chance of getting sideswiped by a business failure, earnings miss, etc 3) We buy from motivated or forced sellers = we have an advantage over the seller in the “zero sum” analogy.

BusinessWeek: Moody’s Defied as Banks Advance Among Investors - Every measure of risk in the credit markets shows the banks enjoy greater confidence among investors now than before Moody’s said the downgrades reflected a deteriorating outlook.

The Financial Lexicon: The Market Says Morgan Stanley is Junk - Perhaps, rather than spending their time attempting to spin the Moody’s downgrades as positive, analysts and the media would be better suited attempting to figure out why the corporate bond market is pricing the bonds of certain financial institutions as if the ratings need to come down even more.

Sober Look: The Market Wants More High Yield Bond Issuance - year-to-date we have about $19bn more in demand than in new supply. Corporate America continues to have access to cheap credit. But uneasy about increasing leverage and with limited investment opportunities companies are not issuing enough paper to satisfy the enormous appetite for fixed income product.

Benzinga: Under The Hood: An Unheralded Junk Play - With investors’ thirst for yield increasing, the dominance of HYG and JNK in the high-yield bond space has not served as a deterrent to ETF sponsors looking to introduce new junk bond funds. Rather, the success of those ETFs has prompted a spate of new high-yield bond fund introductions this year.

Economists View: A Long Wait to The Next FOMC Meeting – With the outcome of the June FOMC meeting settled, we can set our sights on the August meeting. And at this point, the outcome of that meeting is just as hazy as the last. There is once again a wide range of reasonable views, spanning from QE3 at the next meeting until early 2013, or not at all.

ETF Trends: ETF Spotlight: Emerging Market Debt - The iShares J.P. Morgan USD Emerging Markets Bond Fund tries to reflect the performance of the J.P. Morgan EMBI Global Core Index, which follows U.S. dollar-denominated debt instruments issued by sovereign or quasi-sovereign entities from emerging market countries.

Learn Bonds: 9 Ways to Minimize Taxes on Bonds and Bond Funds - 1. Chose Bonds over Stocks for Tax Sheltered Accounts. 2. Use Specific identification of shares. 3. Tax Harvest While Avoiding the Wash Sale Rule.  4. Donate Investments with Large Capital Gains to Charity. 5. Use your loss carry-forward. 6. Do not invest in a bond fund right before it makes a capital gains distribution. 7. Look for funds with low turnover. 8. Choose Passively Managed Funds over Actively Managed Funds. 9. Buy Municipal Bonds or Municipal Bond Funds.

 Businessweek: Treasuries Beat Rest of Bonds as Mortgages Show 1% Growth – U.S. government debt has gained 2.9 percent since March, while corporate bonds returned 1.9 percent, mortgages rose 1 percent and municipal bonds increased 1.8 percent, according to Bank of America Merrill Lynch index data.

MarketWatch: Fitch: Unemployment Bond Issuance Growing – Fitch believes the issuance of unemployment bonds will continue as states seek to repay federal obligations and stabilize unemployment funds.

Bond Buyer: Bond Market Update - Munis were steady Monday afternoon, according to the Municipal Market Data scale. On Friday, the 10-year yield ended steady at 1.86% for the sixth consecutive trading session while the two-year ended steady at 0.32% for the 16th straight session. The 30-year yield finished up one basis point to 3.16%.  Treasuries strengthened Monday. The benchmark 10-year yield and the 30-year yield each dropped seven basis points to 1.81% and 2.68%. The two-year yield fell one basis point to 0.31%.

IPREO: This Week’s Muni Deal Calendar

 

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