Treasuries Boosted By Retail Sales Drop and Today’s Other Top Stories

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Treasuries were given a boost today after official data showed that retail sales unexpectedly fell in January by the most since June 2012, and the bad news didn’t end there. Initial claims for jobless benefits also rose last week, increasing demand for safe haven assets.

Yields on the U.S. 10-year note fell to 2.736 percent at the close of play on Thursday. (Yields move inversely to bond prices, when bond prices go up, yields go down and vice versa..)

U.S. Treasury bond prices got an extra boost today from robust demand on a $16 billion sale of 30-year bonds. The new 30-year bonds were sold at a yield of 3.69%, compared with 3.696% right before the sale. A lower yield suggests demand was stronger than dealers had anticipated.

So it seems Jeff Gundlach was right about the short-term strength of Treasuries, especially if reports are true that tomorrows data releases are set to show growth in U.S. industrial production slowed and consumer confidence fell in January, both of which add to signs the economic recovery is waning.

“There’s an undercurrent of concern that economic conditions are not as good as people thought a couple of weeks ago,” Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia told Bloomberg.

 

Todays Other Top Stories

Municipal Bonds

Businessweek: – Puerto Rico cuts push OppenheimerFunds junk holdings above limit. – OppenheimerFunds Inc. has municipal funds with more speculative-grade holdings than prospectuses allow after Puerto Rico was cut to junk by the three biggest rating companies.

Financial Advisor: – Winter in Puerto Rico. – Puerto Rico is not representative of the broader municipal bond market, as both state and local governments continue to benefit from improving revenues.

Marketwatch: – Puerto Rico bond turmoil sparks warning from muni fund. – The municipal bond arm of OppenheimerFunds warned investors Wednesday of risks from the Puerto Rico debt it holds, publicly acknowledging concerns that led to steep investor redemptions and a year of losses in Puerto Rico debt.

MoneyBeat: – Puerto Rico’s junk status unlikely to force funds to sell. – Puerto Rico’s new junk credit status doesn’t necessarily mean big funds will have to dump its debt.

MoneyNews: – Analysts bullish on muni bonds. – After tumbling last year amid concern over Detroit’s bankruptcy and Puerto Rico’s deteriorating financial health, municipal bonds are poised to continue this year’s early rally, as most states and cities are getting their finances in order, experts say.

MoneyShow: – A safer strategy for munis. – We believe the municipal bond market’s fundamentals are improving, and that there are ETFs that give investors the opportunity to limit their exposure to rising rates, suggests Todd Rosenbluth, S&P Capital IQ director of ETF Research in The Outlook.

 

Education

LearnBonds: – What the market is telling us. – Today, I want to look at the state of confidence that exists in the financial markets.  As usual, I have a few statistical measures that I rely upon to give me some indication of how investors are feeling in general about how they perceive the market.

NASDAQ: – Bond Basics: Corporate versus Sovereign risk. – In a previous post, I took a closer look at the significance of duration , which measures the sensitivity of a bond’s price to changes in interest rates. When you buy a bond you take on interest rate risk; the higher the duration the more interest risk you have. You also take on what is known as default risk, which is the risk that the issuer will be unable to fulfill its debt obligations. For today’s post, I’m going to explain how default risk applies to different types of bonds, starting with corporates.

 

Treasury Bonds

WSJ: – Treasury bonds pull back; 10-yr auction draws strong demand. – U.S. Treasuries fell for a third straight session on Wednesday, with recent weakness in bond prices drawing foreign buyers into a $24 billion sale of 10-year notes.

 

Corporate Bonds

Income Investing: – Time Warner bonds surge on comcast deal. – It’s M&A time in corporate bond-land again, and today’s big winner is Time Warner Cable. Its bonds are surging Thursday on news that Comcast will buy the company in a $45-billion all-stock deal.

 

High Yield

Focus on Funds: – ‘Risk off’ market? Not quite, to judge by junk and mega caps. – In some respects 2014′s market has had a classic “risk off” feel. The S&P 500 fell 3.6% in January. Gold, yesteryear’s haven, is gaining, boosting SPDR Gold Trust (GLD). Bonds are back in style. Low-beta, or low-volatility stocks, are outperforming.

George Putnam: – High-yield bonds: Do current risks outweigh returns? – A high-yield bond (aka junk bond) is a corporate bond rated as below investment grade, typically meaning it has a Standard & Poor’s credit rating of BB or lower. High-yield bonds typically pay a higher rate of interest than investment grade bonds, and they also carry a higher risk of interest or principal default.

 

Investment Strategy

The StarPhoenix: – Income harder to find these days. – Higher valuations make it more difficult to find attractive entry points, but they also produce lower dividend yields. As a result, the Venator Income Fund portfolio managers have made a slight shift to Canadian convertible bonds from equities and U.S. high-yield bonds.

 

Bond Funds

ValueWalk: – ETFs drop 3.2 percent amid U.S., EM equity worries. – ETFs had a rare drop in value as investors moved away from emerging market and US equities in general, losing 3.2% in total ETF/ETP (exchange traded funds/products) assets, dropping to $3.2 trillion, according to a ETFGI report on Thomson Reuters.

ETF Daily News: – Bond investors, rein in your expectations. – The three-decade bull market in Treasury bonds had to end sometime, and 2013 marked a major inflection point between bull and bear.

ETF Trends: – Attractive alternative treasury ETFs. – Treasury yields are beginning to tick higher after the bout of volatility sent investors to safety. While rates haven’t surged, Treasury bond exchange traded fund investors should prepare for a rising rate environment.

 

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