What Treasuries Are Telling Us…The Mind of Jeff Gundlach…Inflation Expectations… and more!

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All Star Charts: – What are these two bond ETFs telling us? – I keep hearing about this secular “Great Rotation” out of bonds and into stocks. I’m sure it gets clicks and sells newspapers. But as always, we’ll look to price action to help us determine what’s rotating and what isn’t. I’ll do my best to circle back and reevaluate this market again on the blog in a couple of weeks. But right now, it’s hard not to be encouraged by the action in government bonds.

Crossing Wall Street: – The mind of Jeffrey Gundlach. – Jeffrey Gundlach is a prophet, a mathematician, an art aficionado and occasional dabbler in painting, a former drummer in a failed rock band, a sometime student of philosophy, a reciter of poetry, a blowhard, a consumer of sports automobiles and crossword puzzles, and an egotist of striking dimensions. He is also the manager of one of top-performing bond funds on the market. So who is the real Jeffrey Gundlach?

Zerohedge: – An unprecedented $660 billion in excess debt demand, and what it means for bond yields. – When the BOJ announced two weeks ago the full details of its expanded easing program, which amounts to monetizing a whopping $720 billion in government bonds over the next year (a move which makes even the Fed’s own open-ended QE appear like child’s play in perspective), one thing it did was lay to rest any hope of a rotation, great or non-great, out of bonds and into equities.

Learn Bonds: – Why aren’t gold bonds plunging along with the stocks? – By now, most everyone who follows the financial markets even passively is likely aware of the recent plunge in precious metals prices.  I have written articles sharing my thoughts on gold and the gold mining stocks in light of the epic price drop.  I would now like to turn my attention to the bond side of the equation.

FT: – Pimco’s Gross seeks safety in Treasuries. – Bill Gross sees bubbles almost everywhere he looks, but no end in sight to the great 30-year bull market in bonds on which he has built his career. A co-founder of Pimco and manager of its $289bn Total Return bond fund, the world’s largest, he says that there will be no bear market until governments and central banks are able to spur genuine economic recovery.

ETF Trends: – Two high-yield bond ETFs for rising rates. – Investors want yield but are concerned they could get hurt if interest rates rise. High-yield corporate bond ETFs with shorter durations provide a nice balance.

Business Mirror: Corporate bonds provide new haven to investors. – The $10 trillion global market for corporate bonds is providing a haven to investors after lagging behind a global surge in stocks and commodities as concern mounts that economic growth is slowing.

Self Evident: – What was Gallagher thinking? – There is nothing that bores me more these days than swatting away dire predictions about the municipal bond market (or any market, now that I think about it).  I have been playing on the internet long enough to know that there are a lot of nutty people in this world, and it is physically impossible to pause and roll your eyes at all of them. I do feel compelled, however, to respond to comments made recently by Dan Gallagher, who serves as a commissioner on the Securities and Exchange Commission.

Research Puzzle: – Critical Indicators. – This chart shows a nice summary of a couple of key aspects of the interest rate environment during the last sixteen years. There have been some notable changes of late, although sizable earlier moves in the chart make the recent ones seem like mere blips. These are critical indicators for policy makers and market participants — and not just fixed income investors, given their inter-market importance.

WPRI.com: – Keep municipal bonds tax-exempt, Raimondo urges Congress. –Treasurer Gina Raimondo has a message for members of Congress: don’t tax municipal bonds. Raimondo and 41 of her fellow state treasurers sent a letter last week to the top Republican and Democrat on the U.S. House Ways and Means Committee, emphasizing “the importance of maintaining the current tax exemption for municipal bond interest” as they consider plans to overhaul the US tax code.

ETF Trends: – Market volatility lifts Treasury bond ETFs on growth concerns. –Sovereign debt markets rallied across the globe on new concerns over lowered prospects of future growth rates this past week. Long-term Treasury bond exchange traded funds such as the iShares Barclays 20+ Year Treasury Bond ETF are back in focus as investors take advantage of higher bond prices.

Bret Jensen: – A better way to high yields than junk bonds. – With junk bond yields continually squeezed with investors failing to be properly compensated for the risks they’re undertaking, you have to ask the question, is there a better solution?

Barron’s: – Junk bonds hit another record-low yield. – In today’s installment of the never-ending fall of junk bond yields, the average yield across the speculative-grade universe has dropped below the 5.5% threshold for the first time ever, entering this week at 5.496%, according to a benchmark Bank of America Merrill Lynch index.

Indexuniverse: – PIMCO to launch ETFs of 3 mutual funds. – PIMCO, the world’s biggest bond fund manager, said today it has received regulatory approval on its plans to roll out ETF versions of three of its fixed-income mutual funds, much as it did with Bill Gross’ Total Return Fund, suggesting launch is near.

MarketWatch: Are bonds the stock market’s Achilles heel? – The severe breakdown in gold and other commodities, the technicals of small-caps, the stubbornness of the dollar, and the behavior of Treasury Inflation Protected Securities all point to an about face to the risk-on trade, as more and more people realize that a “risk-off risk rally” isn’t indicative of a healthy bull market whatsoever. The fragility of the market based on inter-market analysis remains elevated until the deflation pulse ends.

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