Treasury Traders Bet Obama…$34.2 Billion in Munis Tied to Elections…Time to Sell EM Bonds?..and more!

Best of the Bond Market  for November 5th, 2012

Barron’s:Treasury bond market pricing in an Obama re-election. – Plenty of people are trying to handicap tomorrow’s election, whether by office wager or detailed statistical probability analysis, but for its part the market for U.S. Treasury bonds is putting its money on a second term for President Obama.

Chicago Tribune: – US voters to decide on $34.2 bln of municipal bonds. – US voters will decide the fate of scores of bond referendums totaling $34.2 billion on Tuesday along with a slew of ballot measures, including several dealing with raising or restricting taxes.

FT: Time to sell emerging market bonds? - “Every day, I see three to six new [EM] bond issues,” he told beyondbrics. “And they are all getting massively oversubscribed. People are not looking at price or the underlying company, they are buying indiscriminately.”

SacBee:Bankruptcy filings by California cities may rein in pensions. – As financially troubled cities suspend their payments to California’s pension fund, federal bankruptcy judges may have the final word on the long-assumed inviolability of retirement benefits.

LA Times:Cities’ disputes with CalPERS have ramifications, Moody’s says. – CalPERS’ disputes with San Bernardino and Compton could have ramifications for other cities in financial distress and their creditors, according to a Moody’s report.

BRecorder: – Bond investors on edge no matter who wins US election. – Bond investors are, by nature, a cautious lot. As they head into the US presidential election on Tuesday uneasy, they say no matter who wins, the government will still have to deal with the “fiscal cliff” and its profound economic consequences.

FT:For millions of muni investors, here are the ballots the really count. – State and local government credit ratings could come under pressure, depending on the outcome of scores of ballot measures up for a vote in Tuesday’s US elections. Rating agencies are warning that many of the measures threaten to limit the financial flexibility of governments and impair their ability to withstand a future economic downturn.

Bloomberg:BlackRock’s Hayes on Sandy and the muni bond outlook. – Peter Hayes, head of municipal bonds at BlackRock Inc., talks about the impact of superstorm Sandy and the presidential election on the muni bond market and investment strategy. Hayes speaks with Tom Keene and Sara Eisen on Bloomberg Television’s “Surveillance.”

Learn Bonds:Confusing investing safely, with safely investing in bonds. – Are investors being ripped off when they invest in municipal and corporate bonds? There is a problem with some brokers overcharging for bond trades.  However, the problem is not with bonds but with a few bad brokerage firms.

The Short Side of Long:Sign of capitulation: Are we there yet? – The bond bubble is definitely approaching its maturity, so those who are piling into these assets right now will most likely be “slaughtered” in the up-and-coming months and quarters. Having said that, the majority of investors view this as a contrarian buy signal for equities, but in my opinion those investors aren’t doing their homework.

Bank Investment Consultant:Outflows to muni bond funds mark a dark week for the market.  – After withstanding the heavy body blow dealt by Hurricane Sandy this week, the municipal bond market could not have been expected to keep up its streak of inflows to muni bond mutual funds.

WSJ:Munis with an extra kick. – Fixed-income investors, hungry for yield, have been pouring money into high-yield municipal debt, a small but highly lucrative niche of the muni market. For the three years ended Oct. 31, funds in the sector returned an average of 9.1% a year. However, this isn’t a market for the faint of heart or the uninformed. High-yield municipal debt has inherent risks and anomalies, and it is critical that investors approach the market with care.

ETF Trends:Emerging market corporate bond ETFs trump low treasury yields. – Low US Treasury yields and a desire to diversify their bond portfolios have pushed investors to exchange traded funds that track emerging market corporate debt.

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