T-Bills Hit By Debt Limit Worries and Today’s Other Top Stories

Tax refundTo get the Best of the Bond Market delivered to your email daily click here.

U.S. Treasury bill rates jumped on Friday as concerns mount that Washington won’t raise the government’s $16.7 trillion statutory borrowing limit before it is expected to be exhausted in early March.

Business Insider reports that: Patty Murray, the Democratic Senator from Washington who was instrumental in hatching the recent budget deal, says today she is taking a harder line on the debt ceiling.

“We will not negotiate over whether or not the United States of America should pay its bills,” she writes in a letter out today. “And once again, before they get any further down this damaging path, we call on our Republican colleagues not to play politics with our economic recovery.” Murray said.

Citi analyst Andrew Hollenhorst wrote in a research note published on Friday that he estimated the government will unlikely have enough cash on hand after March 3 to meet its debt obligations and payments on Social Security and other social programs.

The problem stems from last Octobers showdown between Congress and the White House which resulted in the the borrowing cap being extended until Feb. 7.

If the debt ceiling isn’t raised by then, the Treasury will still be able to pay its bills by moving cash between government accounts for a few weeks to keep just under the new limit.

T-Bills due March 30 rose to 0.065%, up nearly 4 basis point from late on Thursday.

 

Todays Other Top Stories

Municipal Bonds

Bernardi Securities: – 2013 Municipal Bonds Wēijī: Does crisis equal 2014 opportunity? – The municipal bond market’s behavior in 2013 could be summed up by the old saying that the Chinese word for “crisis” – wēijī – is actually composed of two characters representing “danger” and “opportunity.” John F. Kennedy is credited for popularizing this concept in a 1959 speech, and it has since become a staple of motivational speakers looking to inspire their audiences to seize the opportunities that appear in the midst of uncertain times.

ETF Trends: – Muni nation: Shorten up for rising rates. – This past Tuesday Market Vectors® launched SHYD, Short High-Yield Municipal Index ETF. SHYD seeks to track an index that only includes bonds with 1-10 years until maturity. The focus on this maturity range has generally meant lower duration  — or sensitivity to changes in interest rates — and yields competitive with those of an all-maturity high yield municipal bond index. Less rate sensitivity has generally meant less of a negative impact on total return during periods of rising interest rates.

FT: – Banks pitch possible Puerto Rico bond offers. – Banks including Morgan Stanley and Barclays are pitching potential bond offerings for Puerto Rico as the debt-laden US commonwealth seeks to raise funds and avoid a credit-rating downgrade, according to people close to the situation.

Bloomberg: – Minnesota plans $468 million Vikings stadium bond sale next week. – Minnesota plans to sell $468 million of bonds on Jan. 27 to help finance a new stadium for the National Football League’s Vikings, said John Pollard, a spokesman at the state’s management and budget office.

Cate Long: – Will Puerto Rico sell general obligation bonds? – The New York Times reported that Morgan Stanley is shopping a potential $2 billion general obligation bond deal for Puerto Rico. Bloomberg followed up with a story that had a few more details about the offering that Puerto Rico supposedly has not authorized.

 

Education

LearnBonds: – Risk Tolerance – What every investor should know. – Risk and return potential are fundamentally linked in investing. Lower risk will have a lower possible return, while higher risk prospects will have a higher potential for return. Investors often consider the link between risk and return to be a spectrum: on the left side are low risk (and consequently low-return) investments, and on the right side are higher-risk, higher-return investments. The higher the risk of an investment, the higher the potential return from that investment.

 

Treasury Bonds

FT AlphaVille: – Inflated worries, part 2 — a different look at the labour-market slack conundrum. – The bond market is just trying to anticipate the Fed, not actually fight it for control of the yield curve.

Investorplace: – Exploit the boom in Treasury bonds. – Don’t look now, but one of the world’s most hated asset classes is making a comeback. That’s right. The seemingly inevitable decline in Treasury bonds — and, by extension, the popular iShares 20+ Year Treasury Bond ETF (TLT) — has been interrupted.

 

Corporate Bonds

Bloomberg: – Credit swaps in U.S. rise to five-week high; Textron sells bonds. – A measure of U.S. company credit risk climbed to the highest level in more than five weeks after a gauge of China’s manufacturing contracted. Textron Inc. (TXT) sold $600 million of bonds.

 

High Yield

Professional Adviser: – Is this the fixed income market’s bright spot? – High yield offers the best potential in bonds but careful stock selection is key to hunting down the compelling returns available. Rayner Spencer Mills’ Ken Rayner explains.

WSJ: – Mergers could clog flow of junk bonds. – Investors’ healthy appetite for junk bonds may be tested in coming months if two supersize corporate takeovers take place.

Zacks: – Market Vectors launches high yield municipal bond ETF. – The year 2013 was pretty rough for municipal bonds as investors embraced equities over fixed income. Beyond low returns, the fiscal strength of many municipalities remains pretty weak, as bankruptcies in small California towns and the major city of Detroit had a dampening effect on the returns—and outlook– of the municipal bond market.

Forbes: – High yield bond funds see 3rd straight week of investor cash inflows. – Retail cash inflows to high-yield funds totaled $423 million for the week ended Jan. 22, according to Lipper, a division of Thomson Reuters. That’s an increase from inflows of $65 million last week, and it extends the inflow streak to three weeks for a total of $1.23 billion, by the weekly reporters only.

 

Emerging Markets

Financial Post: – Finding a sweet spot in EM bonds. – Mike Reed believes there is a compelling growth story to be found in emerging markets as part of a broader opportunity for convertible bonds.

ETF Trends: – Emerging markets: Badness is happening right now. – Emerging markets stocks and exchange traded funds, many of which notched dismal performances last year, are offering up sequels to those unfortunate performances. Abundant are the anecdotes that illustrate just how ugly emerging markets ETFs have been to start 2014.

Focus On Funds: – Emerging Markets Off to Worst Start Since ’11 — Blame the Fed? – The thud you hear is the sound of emerging-markets stocks and currencies falling even farther out of favor. The group is off to its worst start in three years, with a week to go in January.

 

Catastrophe Bonds

Artemis: – Catastrophe bonds replace high-yield bonds for financial advisor. – Catastrophe bonds, as a fixed income investment which currently offer higher yields than many so-called high-yielding bonds, are replacing more traditional sources of yield for one financial advisors clients.

 

Investment Strategy

iShares Blog: – During times of financial stress: buy bonds. – For investors who are worried about a correction, Russ provides a look at which traditional safe-haven assets tend to perform best during times of uncertainty.

 

Bond Funds

IndexUniverse: – Sage’s Smith: ETFs for shifting scenarios. – The consensus among market strategists predicts 2014 will continue along the trajectory that was established in the second half of last year; namely, modest but gradually improving U.S. and global economic growth rates with tame inflation. In other words, we can reasonably expect economic conditions that are not too hot and not too cold, but just right. But what if this “Goldilocks” scenario doesn’t play out as scripted?

Andrew Thrasher: – The bond chart I’m watching right now. – Bonds have begun to come back to life in 2014 as traders began to realize that the Federal Reserve pulling back on its bond buying program is not the end of the world and that sentiment towards bonds is at record lows. I began getting interested in the bond chart back in September when the Barclay’s Aggregate Bond Index was holding support and seeing bullish internals. I’ve also been discussing the range the 10-year Treasury yield has been in with resistance at 3% in my weekly Technical Market Outlook.

WSJ: – U.S. Stock funds attract cash while ETFs see outflows, lipper says. – Mutual-fund investors sent money into the U.S. stock market in the week ended Jan. 22, while exchange-traded funds saw a net outflow for the second week in a row.

Forbes: – High yield bond funds see 3rd straight week of investor cash inflows. – Retail cash inflows to high-yield funds totaled $423 million for the week ended Jan. 22, according to Lipper, a division of Thomson Reuters. That’s an increase from inflows of $65 million last week, and it extends the inflow streak to three weeks for a total of $1.23 billion, by the weekly reporters only.

ValueWalk: – Inflation-linked ETFs rebound after seven months. – Inflation-linked bond ETFs had their first month of inflows after seven straight months of outflow, and ETFs backed by Japanese and US equities recorded strong inflows even though these markets are further along in their recovery than the EU and the UK, and likely have fewer easy gains to make. Commodities ETFs had net outflows last week, though there wasn’t much activity overall.

Reuters: – Investors pour cash into mutual stock and bond funds. – Taxable bond funds attracted $3.1 billion in new cash, marking their third straight week of inflows. Funds that mainly hold U.S. Treasuries attracted $47 million in new cash, marking their first inflows since last November.

 

Print Friendly


                                   

Leave a Reply

Your email address will not be published. Required fields are marked *