Best of the Bond Market for September 14th, 2012
The Reformed Broker – Video: Jeff Gundlach Talks QE3 and more with Bloomberg’s Tom Keen
Index Universe: – Vanguard’s Bogle says Corporate bonds a good buy with rates so low. – John Bogle talks about the wisdom of adding corporate bonds to fixed-income allocations in this age of financial repression, in an interview with Olly Ludwig about his latest book.
Reuters: – Fed decision increases risk of loss in bond investments. – The Federal Reserve’s decision to continue flooding markets with liquidity and to keep interest rates low until 2015 has increased the risk of capital losses on US credit investments, if Treasury yields should make a sudden upward move.
WSJ: – Not game over for bonds just yet. – It’s crunch time for bond investors. Global central banks are going all-in: the U.S. Federal Reserve buying more bonds and the European Central Bank says it will backstop fragile euro-zone sovereigns. U.S., German and U.K. 10-year bond yields have risen and are threatening to break out of the range they have held since May. But the global growth outlook still looks dismal. It’s too early to give up on bonds yet.
WSJ: – Mortgage backed debt benefits as Fed announces third round of bond buying. –Mortgage-backed securities soared in their best day in nearly four years, as the Federal Reserve announced a new round of bond buying in the sector in its latest program to stimulate the U.S. economy. By purchasing mortgage-backed bonds, the Fed intends to lower the rate at which banks can sell their loans through government-controlled Fannie Mae, and Ginnie Mae securitization programs, which fund some 90% of U.S. home loans.
ETF Trends: PIMCO well positioned for bounce in mortgage bonds - PIMCO Total Return ETF (NYSEArca: BOND) had 45% of its portfolio in mortgage securities at the end of August, so the fund managed by Bill Gross is nicely positioned for the Federal Reserve’s third round of quantitative easing.
Abnormal Returns: After the Fed its time to be careful not to confuse fact with opinion - Armchair pundits are a dime a dozen. They provide you their opinions on the economy and stock market for free because that is what their opinion is worth. In the end you alone are in charge of of portfolio and have to make the difficult decisions necessary in a highly unique investment environment.
Brinker Capital: Quantitative Easing Ad Infinitum? - While the Fed’s actions will increase the risk appetite of investors, we still need help from fiscal policy before year end.
Reuters: – Hot US bond market lures investors to re-think risk. – US bonds have become so red-hot that investors are buying into some of the riskiest sectors in the high-grade market, including names they refused to look at just a few months ago.
Bloomberg: – Corporate bond sales in U.S. busiest in six months as Fed acts. Corporate bond offerings in the U.S. soared this week to the busiest pace in six months as borrowing costs tumbled and the Federal Reserve unleashed its third round of quantitative easing to stimulate the economy.
Bloomberg: – Junk-Bond bears squeezed with Fed unleashing QE3. – The number of shares borrowed to bet against State Street Corp. (STT)’s exchange-traded high-yield bond fund has plunged 49 percent since Aug. 30, pushing its price to a 15-month high, according to data compiled by Markit Group Ltd.
Cullen Roche: – A disturbing look inside the mind of Ben Bernanke. – I’ve long expressed my displeasure with the specific approach implemented by the Bernanke Fed. I am admittedly hard on Dr. Bernanke at times, but I think much of their framework is based on a flawed ideology and misunderstanding of the way the economic machine works.
Business Insider: – Fed policy will destroy the world. – Marc Faber is known to be a doomsayer. After the Fed announced unlimited QE3, he appeared on Bloomberg TV saying that Fed policy will destroy the world.
Learn Bonds: – CDs still beating bonds for short term investors - The highest yielding 1 year CD pays 1.1% or 0.92% more than a similar treasury.
CommodityHQ; – Why Q3 is just delaying the inevitable. – Markets were overjoyed by the announcement of a third quantitative easing program that was announced yesterday. But some speculate that Bernanke made the move to win another term at the reigns, as a stronger economy could keep Romney out of office, and Romney has been nothing but vocal about his plans to replace the Chairman.
Bloomberg: – Texas schools sell bonds to pay for stadiums despite cutbacks. – Some Texas school districts are using bonds to pay for bigger and better sports facilities which provide a way to keep “local money at home,” according to Dee Hartt, the Tatum Independent School District’s superintendent.
“I luv the smell of a bond sell-off in the morning” #Bonds
— InterestArb (@InterestArb) September 14, 2012
Gross: #Fed to buy mortgages ‘til the cows come home. Think 7% unemployment, 2.5% inflation targets. Buy real assets…gold…a house!
— PIMCO (@PIMCO) September 14, 2012
For those of you who hate this credit rally as much as I do, remember that Chuck Norris doesn’t hedge. HE WAITS.
— Jake Freifeld (@jake_f) September 14, 2012
from pre-QE3, 10-yr govie yield up 14bps and 30-yr yield up 18bps
— Taylor Riggs (@TaylorRiggs_BB) September 14, 2012
Standard & Poor’s assigns its ‘A-’ longterm rating to California’s ~ $1.6 billion tax-exempt general obligation (GO) and GO refunding bonds.
— Cate Long (@cate_long) September 14, 2012