US Rate Cut Coming?…BlackRock Killing Bonds?…A Junk Bond Record…and more!

Best of the Bond Market for September 11th, 2012

WSJ: Moody’s hints at U.S. rate cut if Congress fails to reach budget deal. – Moody’s Investors Service warned that budget negotiations during the 2013 Congressional legislative session will likely determine the direction of the U.S. government’s current triple-A rating and negative outlook.

CNBC: – Is BlackRock trying to kill off individual bonds? – BlackRock recently transferred 4000 individual bonds into 6 ETFs for one client.  If most big funds start buying the ETFs instead of the bonds, what does that do to the mechanics of the bond market? Or the desire of companies to use bonds to raise cash? What happens to credit analysis?

Distressed Debt Investor: High yield bond yields set record low - According to both the Barclays high-yield index and the CS HY index, yields in high yield have reached an all time low of ~6.6%. Further, over the last few weeks, traders and syndicate desks have been whispering of a simply gargantuan amount of high yield and leveraged loans coming this month.Hi

Business Insider: Gluskin Sheff’s David Rosenberg does 180 on “cult of equities” –  In a new note today, Rosenberg says “It is very interesting to hear how pundits talk about the cult of equities being dead. I wrote about this recently, but realize that this line of thinking isn’t entirely accurate.”

Bloomberg:Harrisburg plans to skip payment for second bond default. – The city will miss $3.4 million in payments due Sept. 15 on $51.5 million of bonds issued in 1997, William B. Lynch, Harrisburg’s receiver, said today by telephone. It skipped paying $5.27 million that was due March 15 on the same bonds.

BusinessWeek: Banks hide risk transforming capital for traders. – In an attempt to circumvent new rules which force traders to post U.S. Treasury bonds or other top-rated holdings to guarantee their bets. Some U.S. banks plan to let customers swap lower-rated securities that don’t meet standards in return for a loan of Treasuries or similar holdings that do qualify.

Learn Bonds:Everyone is wrong: QE does not lower interest rates. – If you spend anytime reading or watching the mainstream media it has likely been pounded into your brain that quantitative easing (QE) lowers interest rates. But they’re wrong, find out why.

Cate Long:Chicago teachers fight for the kids as they defend against more bureaucracy. – There is a lot at stake in the teacher’s strike in Chicago. The teachers are fighting for autonomy and less emphasis on standardized testing and the school administration is angling for more control. It may take a few or more years to evaluate the true outcome of this battle.

Bond Buyer: Buffet Muni trade may help wake up muni CDS market - the Berkshire trade, sound technicals and a recent industry move to standardize contracts might increase interest in muni credit default swaps (CDS), which has suffered from apathy on the part of investors and a lack of price volatility to attract traders.

Bond Squawk: Top 3 telecoms/media corporate bonds – Here are three corporate bonds in the Telecom and Media sector which benefit from recurring revenue streams and favorable metrics in today’s environment.

NY Times: Governments benefiting from low rates at the expense of individual saversThe fact that interest yields are so low in so many parts of the world is no coincidence. Rates are determined not only by markets, but also by government policy. And right now many governments say they have good reason to keep their own borrowing costs as low as they possibly can.

Brian Anderson: Defined payment income streams can yield 7% - Defined Payment Income Streams are vehicles which essentially take the monthly retirement payments from a person and transfer the income to a purchaser. The purchaser then continues to receive the seller’s retirement income for the duration of the agreement.

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