This Week’s Top Bond Market Stories – July 5th Edition

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LearnBonds

Learn Bonds: – Coping with the limitations of investment grade bonds. – For risk averse bond investors, the coupons available in most investment grade securities are hardly what one might call robust. So how does the fixed income investor deal with continuing yield starvation and forward bond market rate risk? For many, the answer may be simple – establish a bond ladder.

LearnBonds: – Dividend cuts – when “bond equivalents” default. – As the ultra-low interest-rate environment of recent years became too much for some bond-focused investors to handle, the search for greener pastures shifted to the equity markets—specifically to dividend-paying bond equivalent stocks.

 

  To see a list of high yielding CDs go here.  

 

Municipal Bonds

New York Life: – Opportunities in high yield municipal bonds. – Four reasons why high-yield municipal bonds may be currently attractive for income seeking investors.

Reuters: – Wilting municipal bond market to get meager supply next week. – The anemic U.S. municipal bond market will see more meager growth next week when only an estimated $2.45 billion municipal bonds are sold, the smallest weekly total issuance since January, according to Thomson Reuters estimates.

ETF Daily News: – California debt upgrade puts these muni bond ETFs in focus. – After some pretty rough trading in 2013, the municipal bond market has found it easy going this year. Concerns about fluctuating interest rates and financial soundness that troubled the munis last year appear to have taken a back seat for the time being. And the reasons are demand-supply imbalance, falling interest rates and improving credit quality of issuers, resulting in an uptrend in the munis space.

Reuters: – Puerto Rico biggest muni issuer, BofA top underwriter so far in 2014. – Fiscally troubled Puerto Rico was the biggest issuer of bonds in the U.S. municipal market in the first half of 2014 with a single $3.5 billion bond sale in March, according to Thomson Reuters data on Tuesday.

Boston.com: – Conditions look favorable for muni bonds. – Increasing demand, tightening supply, and expectations for higher rates and inflation should bring better muni returns in the coming years, says Nuveen’s John Miller, Puerto Rico notwithstanding.

 

Education

Banking Sense: – How a 10-year Treasury bond works. – Bonds are a fixed income security offering an investor a specified return, during specific intervals, with a full repayment of the principal once it matures. A purchased bond lends money to the issuer, such as a municipality, corporation or the U.S. Government. The U.S. Treasury issues bonds to raise money to fund operations and pay U.S. Government debt. The most watched and invested bond is the popular 10-year Treasury bond.

Banking Sense: – How a 10-year Treasury bond works. – Bonds are a fixed income security offering an investor a specified return, during specific intervals, with a full repayment of the principal once it matures. A purchased bond lends money to the issuer, such as a municipality, corporation or the U.S. Government. The U.S. Treasury issues bonds to raise money to fund operations and pay U.S. Government debt. The most watched and invested bond is the popular 10-year Treasury bond.

Market Realist: – Must-know: What is an exchange-traded fund? – In this series, we’ll introduce you to the concept of exchange-traded funds (or ETFs), their types, and their benefits. In addition to discussing the advantages of investing in ETFs, this series gives a comprehensive view on the trends and scope of the U.S. ETF market.

 

Bond Market

Businessweek: – Fed shelters investors from full cost of bonds selloff, BIS says. – The Federal Reserve has taken some of the sting out of selloffs in Treasuries through its accumulation of government bonds, according to the Bank for International Settlements.

Think Advisor: – Bond market sweet spot. – In one of 2014′s most confounding developments for Wall Street’s army of analysts, bonds are outperforming stocks and long-term U.S. Treasuries are leading the way. At the start of the year, few observers expected this trend.

About.com: – Second quarter 2014 bond market performance overview. – If the bond market’s strong first-quarter performance was surprising, the continuation of the rally through the second quarter proved even more so.

Advantage Voice: – Corporate and municipal bonds steal the show so far in 2014. – While many in the media like to cite the drop in Treasury yields as the big surprise thus far in 2014, the bigger stories are the strong returns from the corporate and municipal markets. But the year-to-date and the second-quarter returns for the Treasury market and its cousin, the agency market, are significantly less than the other domestic markets.

Businessweek: – No bonds left behind in rally except coal-producer debt. – The almost 6 percent rally in U.S. company bonds this year has left the coal industry in the dark.

 

Treasury Bonds

Business Recorder: – Long yields hit three-week lows. – US Treasuries yields dropped on Thursday as traders eyeing a possible slowing of American economic growth drove up prices for a fourth straight day. Yields of 10- and 30-year Treasuries touched three-week lows as investors, already surprised on Wednesday by data showing the US economy contracted more than previously thought in the first quarter, reacted to data showing short-of-forecast increases in US consumer spending.

WSJ: – U.S. Government bonds set for quarterly price rally. – Treasury bonds strengthened on Monday, headed for the second straight quarterly rally that continues to confound bears expecting prices to sell off.

MoneyNews: – PIMCO sees rate increase as Treasurys’ 2014 rally ebbed in June. – Pacific Investment Management Co. Chief Economist Paul McCulley said the Federal Reserve will raise interest rates in about a year as Treasuries ended June with a loss.

Investors.com: – Treasuries, other taxable bonds, munis rose In Q2. – Like Goldilocks tasting the little bear’s porridge, fixed-income investors in the second quarter found the economic news not too hot, not too cold, but just right!

 

Investment Grade Bonds

Businessweek: – Ontario regulator to review corporate bond market Transparency. – The Ontario Securities Commission said it will review corporate bond trading practices to determine whether it should take a more active role to ensure transparency in the C$57 billion ($53.4 billion) market.

Donald van Deventer: – Motorola solutions tops the 20 best value bond trades with maturities of 20 years or more. – We rank the 20 best trades by our usual criterion, the credit spread to default probability ratio. The top 3 bond issues were bonds from Motorola Solutions, Newcrest Finance Pty. Ltd., and Amgen.

Businessweek: – Oracle to Goldman lead record first half bond offerings. – Corporate bond sales worldwide capped the busiest first half of a year on record as borrowers take advantage of investor demand stoked by central banks’ unprecedented stimulus measures.

Traders Magazine: – Corporate bond platforms prep for ugly exit. – Although trading has historically been bilateral and relationship-driven, some see corporate bond market conditions ushering in electronic trading in levels that proponents have long anticipated.

 

Junk Bonds

Houston Chronicle: – Shale’s junk debt could get shaky if Fed raises rates. – Independent oil, gas producers still dependent on the risks that come with speculative-grade bonds.

Income Investing: – Junk Bonds: Attractive carry, but limited gains ahead. – UBS‘s wealth management arm strikes a familiar note in its second-half predictions for the high-yield bond market. Like a lot of strategists, UBS doubts junk bonds can muster much more in the way of gains. But like a lot of strategists, UBS doesn’t see much out there that looks better for now, and recommends investors stay overweight the high-yield market, if a bit less overweight than before.

BNK: – HYD crowded with sellers. In trading on Tuesday, shares of the High-Yield Municipal Index ETF (Symbol: HYD) entered into oversold territory, changing hands as low as $29.91 per share. We define oversold territory using the Relative Strength Index, or RSI, which is a technical analysis indicator used to measure momentum on a scale of zero to 100. A stock is considered to be oversold if the RSI reading falls below 30.

 

Emerging Markets

Wisdom Tree: – The emerging markets 50/50: Yields & volatility. – The emerging markets (EM) represent great valuation opportunities and some of the highest income levels, but they also represent significant volatility. One strategy that may help investors capture yields and mitigate volatility is to blend EM equities and EM corporate bonds.

Pensions & Investments: – Investing in emerging markets bonds in an unconstrained framework. – A benchmark serves a clear purpose in investment management as it provides a starting point for constructing a portfolio, guides how the strategy should be managed and allows investors to evaluate the performance of the active manager versus a passive alternative.

Daily FT: – Emerging bond sales surpass $ 260 b in first half 2014. – Emerging market borrowers sold over $ 260 billion worth of bonds in the first half of 2014, outstripping year-ago levels despite geopolitical noise as borrowers rushed to take advantage of lower-than-expected US yields.

ETF Trends: – EM bond ETFs firm as issuance soars. – Helped by declining Treasury yields, fixed income exchange traded funds holding emerging markets debt have been solid performers this year, rebounding from a disastrous 2013 that saw investors flee the asset class.

 

Catastrophe Bonds

MarketWatch: Fitch: – Pulling of latest cat bond deal may signal pricing floor. – In a signal of investor restraint due to less favorable price-to-risk terms, Munich Reinsurance Group (Munich Re) announced last week that it had withdrawn its latest catastrophe bond issuance (Queen Street X, Ltd.) due to weak demand. Pushback on the deal’s pricing could be a sign that investors are approaching a limit on acceptable catastrophe risks, according to Fitch Ratings.

CNBC: – Pension funds main cat bonds investors. – Urs Ramseier, chairman at Twelve Capital, says that the main benefit of catastrophe bonds is that they are “uncorrelated with other assets” and discusses spreads.

 

Investment Strategy

Rick Ferri: – The risk of short-term bond funds. – Did you miss returns from intermediate-term bond funds because you sat in a short-term bond fund waiting for interest rates to rise? A lot of people did. This strategy has backfired as the opportunity cost of not being in intermediate-term bonds has been more costly than whatever damage rising interest rates might have taken away.

Russ Koesterich: – Mid-year check-in: 5 portfolio moves for the second half. – Though 2014 so far has seen a number of surprises, the year has played out mostly according to the 2014 outlook my colleagues and I laid out late last year.

Kiplinger: – 20 ETF picks to fill the gaps in your portfolio. – The right ETFs can be perfect for filling gaps in your portfolio. Do you need to beef up on foreign stocks? Want to make a bet on companies that will benefit from an improving economy? Looking for more income? We’ll guide you to solid funds for meeting your goals.

PIMCO: – Why bonds are still important. –  Learn a few simple reasons why bonds still are important part of a portfolio, even when rates are low.

BlackRock: – Is now the time to seek inflation protection? – As unrest in the Middle East pushes oil prices higher, and indicators like the consumer price index (CPI) show signs of an improving economy, many investors are wondering: is now the time to build more inflation protection into my portfolio? Matt Tucker weighs in.

 

Bond Funds

MarketWatch: – First trust launches actively managed short duration high yield bond ETF. – New ETF Provides Currency Hedged and Duration Managed Exposure to High Yield Corporate Bond Market.

Western Journalism: – Sad story of savings bonds. – There was a time when millions of dollars of U.S. savings bonds were sold in June — for graduation gifts, for wedding gifts, and just because of the patriotic feelings on the Fourth of July. Those days are long gone. The Treasury has yet to post sales figures for 2012 or 2013, amidst speculation that savings bond sales slowed to a trickle as a result of changes made in recent years.

Fox Business: – The risks of floating rate funds. – Any yield-focused investor would be pleased with a portfolio that had no volatility, generated an annual return of about 4 percent and promised rising income in the years ahead. But all of the new money flowing into bank-loan funds should be a matter of concern.

 

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