Investment Grade Bonds in Focus and Today’s Other Top Stories

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Investment grade bonds are all set to achieve annual returns of at least 10 percent this year , something they’ve only managed twice in the past 17 years.

The bonds have found favour with investors who see little threat of rising interest rates while avoiding the rush into higher-yielding junk bonds that last month handed buyers their biggest losses in a year.

  To see a list of high yielding CDs go here.  

Investment-grade debt is set for an eighth straight monthly gain, having returned 6.5 percent since the end of 2013, according to the Bank of America Merrill Lynch Global Corporate Index.

Investors who’ve refrained from loading up on riskier debt are being vindicated as investment-grade bonds from the U.S. to Asia beat returns on high-yield bonds for the first time in three years. Junk securities have gained 5.8 percent globally after tumult from Ukraine to Gaza triggered the biggest outflow ever earlier this month from U.S. funds that buy the debt.

“We prefer to move up in quality, even though yields are low,” Collin Martin, a fixed-income analyst at Charles Schwab & Co. in New York, said in a telephone interview. “Given the economic backdrop, liquidity and less susceptibility to an event-driven sell-off, conservative investors are better off in investment grade.”

 

Todays Other Top Stories

Municipal Bonds

Bloomberg: – U.S. bank liquidity rule said to exclude municipal bonds. – Municipal bonds will be excluded from the group of easily sellable assets that banks can use to show they’re able to survive a credit crunch, according to a person familiar with the rule.

Reuben Sushman: – Market vectors high-yield municipal index ETF, is the high dividend worth the risk? – We like this ETF with its 5.65% tax free yield and 10.48% YTD, but how much risk is an investor taking and is it truly tax free?

CNBC: – Judge OKs $1.5B Detroit bond repurchase plan. – A U.S. bankruptcy court judge on Monday approved Detroit’s proposal to repurchase nearly $1.5 billion of existing water and sewer revenue bonds tendered by investors and to refinance the debt to save money.

Bloomberg: – U.S. bank liquidity rule said to exclude municipal bonds. – Municipal bonds will be excluded from the group of easily sellable assets that banks can use to show they’re able to survive a credit crunch, according to a person familiar with the rule.

Bloomberg: – BlackRock favors long bonds at priciest since 2012. – When it comes to the longest-dated municipal bonds, value is in the eye of the beholder. The securities are delivering the best returns in the municipal market as yields approaching five-decade lows lead investors to take on more risk.

About.com: – How to invest in double-tax-free municipal bond funds. – If you live in a U.S. state where you need to pay state tax on your investment income, you may be missing the boat if you aren’t earning double tax-free income from your investments. The term “double tax-free” refers to the fact that municipal bonds issued within a state are typically free from income tax on both the federal and state levels.

 

Bond Market

Market Realist: – Fed’s July FOMC minutes have implications for stocks and bonds. – The Fed holds Federal Open Market Committee (or FOMC) meetings eight times a year. The 12-member FOMC is the Fed’s main policy setting body.

Investors.com: – U.S. taxable bond funds chug along at slower pace. – The average U.S. taxable bond fund continues to boast a higher return than the S&P 500 in the past 15 years, though the general stock market has been catching up since it hit bottom after the 2007-08 financial crisis.

Katchum: – Market outlook for the coming months: Stocks, bonds and gold. – The U.S. bond market benefits from a strengthening U.S. dollar and safe haven status.

 

Treasury Bonds

Bloomberg: – Treasury five-year note yields climb most since April on Yellen. – Treasury five-year notes tumbled, pushing yields up the most in four months, as comments from Federal Reserve Chair Janet Yellen and minutes from the last policy meeting reinforced bets the central bank will begin raising interest rates next year.

 

Investment Grade Bonds

ETF Trends: – Investors should hold higher quality corporate bond ETFs. – After the recent sell-off in high-yield bonds, investors should take a second look at investment-grade corporate bond exchange traded funds as a more stable play for the fixed-income market.

Businessweek: – Junk bonds overtaken by high grade as 2014’s favored bet. – Bonds sold by investment-grade companies worldwide are on pace to deliver something they’ve managed only twice in the past 17 years: annual returns of at least 10 percent.

Income Investing: – High-grade beating high-yield in preferreds and corporate bonds alike. – It’s been another good year for corporate bonds, with investment-grade corporates up 6.6% (thanks largely to the unexpected drop in Treasury yields this year) and high-yield up 5.6%. What’s performed even better: preferred securities. which are up 12.1% as a whole so far this year, according to S&P Dow Jones Indices’ U.S. Preferred Stock Index.

 

High Yield Bonds

IFR: – High-yield investors see easily digestible deal pipeline ahead. – High-yield investors expect the roughly US$30bn–$40bn pipeline of new deals in September and October to come in smaller bite-sizes and to be easily digested.

Jon Peter: – Hedged high yield bond ETFs for the squeamish. – 30-Year Bond Bull Market Getting long In the tooth. 3 High Yield Bond ETFs with partially hedged portfolios. High Yield with hedging could help dampen volatility to a fixed income portfolio.

 

Emerging Markets

FT: – Argentine default fails to halt emerging market bond rally. – (Subscription required) In late December 2001, when Argentina defaulted on nearly $100bn in debt, it took emerging market bonds just 48 hours to start staging a rebound, recalls Jerome Booth, a veteran emerging market analyst.

 

Investment Strategy

Barbara Friedberg Finance: – What to invest in if i’m in a high tax bracket. – What investment strategy should a couple use if they’re in a high tax bracket and want to minimize taxes on their investments?

Income Investing: – Short-dated bonds might be less safe than stocks. – With a Federal Reserve interest-rate hike all but assured sometime next year, short-dated Treasury bonds and other traditional safe-haven assets aren’t looking so safe these days, according to Russ Koesterich, BlackRock’s global chief investment strategist.

Before its News: – A solution to America’s low yield environment. – The smart money, aka Wall Street, typically sets the tone in the market, leaving retail investors a step behind. At the beginning of August, however, retail investors tried to beat smart money to the punch by exiting high-yielding bonds first, causing the price to decline rapidly. But Wall Street wasn’t going to let that happen. Instead of hitting the exits and being a day late to the selloff, the big institutions kicked off their own rally and bought up high-yielding bonds.There is much more to this than just “buying the dip.” It actually speaks to what I have been telling you about over the last few months … low interest rates are here to stay.

Citywire: – David Coombs warns on yield-grab correction in ‘really tough’ markets. – Rathbones’ head of multi-asset investments David Coombs is sceptical of the premium associated with interest-paying assets – in spite of a low interest rate environment.

 

Bond Funds

ETF.com: – Accessing Pimco’s alpha via ETFs. – After launching the actively managed Pimco Total Return ETF (BOND) an ETF version of Pimco’s flagship Total Return Fund (PTTRX)—in February 2012, Pimco is looking to strike it big again in ETFs.

Matthew Sauer:  – REITs attractive even with rising rates. – A rapid increase in interest rates is a risk for REITs, not simply higher rates. Rates will remain historically low for some time even after rate increases begin. Economic growth and a bull market in stocks are bullish for REITs.

 

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