PIMCO Suffers Another Month of Outflows and Today’s Other Top Stories

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PIMCO may have turned the corner after a disastrous start to the year. But investors are still not impressed, despite outperforming 79 per cent of its peers in May. Investors continued to desert the bond giant, pulling $5.5 billion dollars from the fund, shrinking its Assets Under Management to an estimated $229bn.

In fact, far from stemming the losses, they appear to have accelerated. May’s outflows represent the 13th consecutive month of outflows and the worst since last October when markets were predicting higher interest rates and lower bond prices. According to Morningstar, $59.6bn has flowed out of the fund since the end of April 2013.

  To see a list of high yielding CDs go here.  

Investors began withdrawing from Gross’s flagship fund last spring as the U.S. Federal Reserve began preparing the market to expect a tapering of its quantitative easing bond buying programme.

Outflows accelerated in January following the shock resignation of the firms longtime Co Chief Executive and proposed successor to Gross, Mohamed El-Erian.

PIMCO has been desperately trying to regain investor confidence ever since El-Erian walked out. Gross has taken a step back from the limelight in an effort to raise the profile of six deputy chief investment officers appointed to replace El-Erian.

There have also been a string of high profile hirings. Just last week, they announced the arrival of Paul McCulley, a high-profile former member of its investment committee, in a new role as chief economist. He will become an additional public face for its views on global macroeconomic issues and central bank policy.

But analysts have expressed concern that the firm has lost several heavyweight personalities in recent years, including Mr El-Erian.

 

Todays Other Top Stories

Municipal Bonds

WSJ: – Municipal-bond website gets makeover to help buyers. – The Internet storehouse of free municipal-bond data and documents is getting a makeover, adding tools and information for retail investors in a market critiqued for years as opaque and unwieldy.

Reuters: – Chicago’s UNO charter schools defrauded bondholders, SEC says. – A Chicago charter school operator lied to holders of $37.5 million of municipal bonds about conflicts of interest and risked having to liquidate its schools, the U.S. Securities and Exchange Commission said on Monday in charging the operator with defrauding investors.

Bloomberg: – Supply wave dismissed as $104 billion of cash waits. – Municipal investors receiving $104 billion of principal and interest payments in the next three months may help absorb the biggest wave of local-government borrowing since March.

Bond Market

Reuters: – Search for yield has insurers running to alternatives. – The rock-bottom yields on offer in the corporate bond market are putting pressure on investment returns for U.S. life insurers and driving them into riskier and less liquid investments such as private equity and infrastructure debt, insurers said.

Bloomberg: – Bond yields lowest since Napoleon are no comfort to europe amid deflation fight. – Europe’s lowest government bond yields since the Napoleonic Wars are signaling investors want more action from Mario Draghi.

FT: – Rate rises will come despite lower bond yields. – At the beginning of the year, for the first time in a long while, we had a consensus view about markets. Over the past few months somehow we have become contrarian again – though we have not changed our fundamental view.

Treasury Bonds

4Traders: – Treasury bonds pull back for fourth session. – Treasury-bond prices pulled back for a fourth session on Tuesday as investors continued to cash chips out of the market that had rallied in May.

Investment Grade Bonds

Market Realist: – Why AT&T could add up to $7.5 billion to the investment-grade market. – AT&T, could add up to $7.5 billion to the investment-grade bonds market, as it is about to issue new debt to fund its $49 billion acquisition of DirecTV. The issuance could be the fifth largest investment-grade corporate debt offering in the U.S. this year.

Bloomberg: – Bond bankers have 144 reasons to fret over underwriting frenzy. – With trading profits dwindling, more dealers than ever are fighting for assignments managing U.S. corporate-bond sales, one of the few bright spots in fixed income. Companies from the most-creditworthy to the most-indebted have been selling trillions of dollars of debt, locking in record-low borrowing costs ahead of the anticipated rise in interest rates.

 

High Yield Bonds

Kiplinger: – Junky bonds deliver rich yield in this actively managed ETF. – he vast majority of exchange-traded funds track an index and charge rock-bottom fees. Advisor Shares Peritus High Yield is one of a rare breed of ETFs that does neither—without any harm, so far, to its shareholders. Over the past year, Peritus outpaced the average junk-bond ETF by 3.8 percentage points.

WSJ: – Junk-bond fund manager warns of high risk. – The manager of the second biggest high-yield-bond fund wants to remind investors that junk bonds can be risky—especially right now.

Washington Post: – Junk bonds favored as BlackRock ETF leads flows. – Bond investors who see no end to the financial repression that’s pushed yields to record lows are piling even more money into notes of the riskiest companies, wagering that central banks will keep propping them up.

About.com: – 3 reasons why high yield bonds’ past performance won’t be repeated. – High yield bonds have amply rewarded investors since the asset class first emerged in the early 1980s. High yield has topped all other bond market categories in the trailing five- and ten-year periods, and it has produced double-digit gains in 17 of the past 34 years. Not least, it has produced outstanding returns in relation to the underlying risk, giving it superior risk-adjusted returns versus both stocks and other segments of the bond market.

Yahoo Finance: – No denying strong demand for short duration, high yield bonds. – Allianz bond fund manager, James Dudnick says the duration of his fund is currently around 1.5 years and the yield approximately 4.5%. He looks for companies that are not overly leveraged and sees a few pockets within the high yield universe becoming overvalued, most notably Triple C rated bonds. Finally, Dudnick says supply is not a problem because the calendar has been full of refinancings which in turn strengthens corporate balance sheets.

Income Investing: – Liquidity keeps improving for junk-rated companies – Moody’s. – Even if junk bonds look exceptionally overvalued, the financial health of the companies that issue them keeps getting better. Moody’s reports today that the liquidity of US speculative-grade companies continued to improve in May, “indicating that concerns about default risk remain modest.”

WSJ: – Junk-bond fund manager warns of high risk. – The manager of the second biggest high-yield-bond fund wants to remind investors that junk bonds can be risky—especially right now.

Emerging Markets

Hedge Fund Journal: – EM debt still offers attractive returns. – At the recent BNY Mellon fixed income conference in Paris, Insight Investment’s Colm McDonagh and Standish’s Alexander Kozhemiakin, outlined why emerging market debt should still be considered by investors despite recent volatility.

Catastrophe Bonds

CNBC: – Disaster bond market set to balloon 150% by 2018. – The $20 billion catastrophe bond market is set to grow some 150 percent in the next four years, as bond issuers take on a new range of perils and investors continue the hunt for yield, data from BNY Mellon shows.

 

Investment Strategy

LearnBonds: – Setting the stage for long term rates which are higher than today’s levels. – Yesterday kicked off a busy week for economic data (both at home and abroad). This week we will get manufacturing data, The Fed’s Beige Book report and (probably most importantly) employment data. If we are going to see volatility in June, this will probably be the week we see it.

WSJ: – When investing in bonds, this adviser plays it safe. – With interest rates so low, many financial advisers have trimmed their holdings of U.S. Treasury debt and added riskier fare such as high-grade corporate debt, low-rated junk bonds and emerging-markets debt in the hopes of getting more yield.

Professional Planner: – Income investors should “think horizontally” to capture attractive yields, says AllianceBernstein. – Retirees and other income investors looking for attractive yields may have more opportunities at their disposal than they realise as a result of changes taking place in the world’s high-yield bond markets, global asset manager AllianceBernstein said today.

Roman Chuyan: – Bond yields make some sense. – Bonds do make sense when we consider the abundant global liquidity, and relative yields around the globe. We expect interest rates to rise gradually from here.

InvestorPlace: – The bond rally is done – Why you must sell NOW. – The yield on 10-year U.S. Treasuries has declined almost 18% year-to-date — is more downside ahead? I don’t think so, as technicals combine with sentiment extremes to mark the bond rally’s end.

 

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