Junk Bonds Come in From the Cold and Today’s Other Top Stories

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Yields on junk bonds have fallen over the past couple of days as flows into high-yield exchange traded funds rebounded following last weeks record outflows.

The Financial Times reports that most of the buying is being done by large mutual funds with portfolio managers saying the recent sell off has made the bonds far more attractive.

  To see a list of high yielding CDs go here.  

There are also signs issuance is beginning to return, with nearly $1bn worth of junk-rated debt being offered in the U.S. markets so far this week, according to data compiled by S&P LCD and Dealogic.

The bounce in the junk bonds comes as large portfolio managers, such as BlackRock and Prudential, said the sharp declines in the past couple of weeks has created “buying opportunities”.

“We have started to add risk to our portfolios and have been buyers again of high-yield credit and bank loans recently,” said Jim Keenan, BlackRock’s head of credit for the Americas and high-yield portfolio manager.

“I wouldn’t say that high-yield bond prices are cheap on a valuation basis. But after the healthy pullback we think they are fair.” Keenan said.

You can read the full story here.

 

Todays Other Top Stories

Learn Bonds

LearnBonds: – Making sense of the movement in longer-term interest rates. – What is going on in the bond market? The yields on U.S. Treasury bonds continue to remain at levels below what most investors thought they would see here in 2014. I personally believed that the yield on the 10-year would be up in the 3.00 percent to 3.50 percent range…with the market tending more toward the higher value. So, in terms of the yield, what has happened since the end of last year?

 

Municipal Bonds

NJ.com: – Casino closings put Atlantic City’s credit rating in peril. – The shuttering next month of Revel, the $2.6 billion hotel and casino that was meant to usher in a new era of opulence in Atlantic City when it opened in 2012, is set to quicken the seaside community’s downward spiral.

Financial Advisor: – MSRB seeks to shed light on muni fees, dark pools. – Regulations have been proposed that would shed more light on the compensation dealers derive from municipal bond sales and dark-pool transactions.

Income Investing: – Battling hedge funds split Puerto Rico bond market into two camps. – Hedge funds have been taking sides Puerto Rico’s financial struggles, and there’s now widening gulf between those sides as mutual funds have retreated from the market for Puerto Rico bonds while hedge funds have stepped in.

BlackRock: – Your three-step municipal bond workout. – It’s been a solid run for municipal bonds so far in 2014. And that has many investors wondering what to do next. Peter Hayes prescribes a three-step muni workout.

 

Bond Market

Financial News: – Views from the top: Bond liquidity and systemic risk. –  lack of liquidity in the bond markets – and the potential consequences of this in a time of market stress – sits foremost in the thoughts of many in finance at present.

 

Treasury Bonds

Nerd’s Eye View: – Accelerating the rising equity glidepath, with Treasury bills as portfolio ballast? – Conventional wisdom suggests that retirees should own a “moderate” amount of equity exposure at the time of retirement – to help their portfolio grow and keep up with inflation for a long time horizon – and then slowly decrease their exposure to equities over time as they age and their time horizon shrinks. However, recent research has suggested that the optimal approach might actually be the opposite.

Fox Business: – Would China sell its U.S. Treasury Bonds? – Peterson Institute for International Economics’ Kent Troutman on concerns China might dump U.S. Treasuries.

WSJ: – Treasury bonds gain ground on disappointing U.S. euro zone data. – Investors scooped up U.S. Treasury bonds on Thursday as disappointing economic data from the U.S. and the euro zone boosted the allure of haven assets.

 

Investment Grade

ETF Daily News: – Safe haven ETFs to consider in the current volatility. – Though the U.S. markets staged a solid recovery during the first half of the year, hitting multi-year highs and ignoring geopolitical threats and lackluster economic data, they have been in a defensive mode in the past few weeks retreating in many sessions.

Income Investing: – AT&T yields more than CenturyLink, but not for long – Morgan Stanley. – Since Windstream shook up telecom valuations by spinning off assets into a real-estate investment trust, things have gotten so wacky that the historically high-yielding CenturyLink yesterday saw its dividend yield fall below that of staid telecom stalwart AT&T.

 

High Yield Bonds

Alacra Store: – U.S. corporate bonds see their first month of losses in 2014. – After posting 10 straight months of positive returns, U.S. speculative-grade corporate bonds finally saw declines in July, and they were not alone after six straight months of gains, investment-grade bonds also saw marginal declines for the month.

Market Realist: – Why high-yield debt funds see record outflows and bonds rally. – While investment-grade bonds funds benefited from rising market jitters, high-yield bond funds bore the brunt. Last week, investors pulled a record $7.1 billion from high-yield bond funds—the largest weekly outflow ever.

Bret Jensen: – 2 high yield plays in energy moving on news. – I have lightened up on most of the REIT sector recently as interest rates appear more likely to rise by end of year instead of continuing to fall. Most of my income portfolio is situated in energy partnerships as the country is in the middle of a huge energy boom boosting growth prospects. Profiled below are two interesting plays in the space that have also been in the news recently.

 

Emerging Markets

China Money Network: – Emerging Asia will see $212B corporate debt mature by 2019. – About US$212 billion of rated corporate debt will mature in the emerging Asia region from the second half of 2014 through the end of 2019, representing about 2.2% of the US$9.5 trillion of corporate debt maturing globally during the same time period, according to estimates by credit rating agency Standard & Poor’s.

 

Investment Strategy

Time Money: – This danger is lurking among your plain vanilla investments. – Five years after financial crisis bond managers are again embracing risky, esoteric mortgage bonds. Here’s how to spot them — and protect yourself.

Bloomberg: – Don’t overlook this bond ETF as a portfolio diversifier. – Diversifying your portfolio sounds simple. To balance out risks, you add some international stocks here, a little real estate there, maybe a commodity fund. But with asset classes moving more in concert in recent years, it’s harder to find investments likely to zig when others zag.

Morningstar: – Looking at duration doesn’t tell the whole story. – Bond investors have reaped the benefits of attractive supply-and-demand dynamics, narrowing spreads, and low default rates since the credit crunch of 2008. Whether the decades-long bull market will soon come to an end is up for debate, but what isn’t is that rising interest rates can wreak havoc on a bond portfolio’s total return.

Professional Adviser: – Where did the smart money go in July? – Investors have been withdrawing from higher risk assets but appear stumped over what to do next with the cash. Cherry Reynard reports.

WSJ: – Is your portfolio too diversified? – With all the investment options that advisers are pushing these days, you can easily get the impression that you are a slacker doomed to subpar performance unless your retirement portfolio is brimming with every asset imaginable.

MarketWatch: – Even Wall Street’s ‘worriers’ are acting like bulls. – A new survey of institutional money managers around the world by Bank of America/Merrill Lynch has found a sudden surge in worry and fear, and a rise in the number buying “protection” against a crash.

 

Bond Funds

Investorplace: – Just walk away from credit-default swap ETFs. – It’s no secret that we here at InvestorPlace love exchange-traded funds (ETFs). These baskets of stocks, bonds and other assets have leveled the playing field for regular retail investors. But do you really need to load up with every new product that comes along?

 

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