Best of the Bond Market for July 9th, 2012
Bond Buyer: Libor Scheme May Have Cost Muni Issuers Millions – If allegations that banks manipulated Libor prove to be true, those actions likely cost municipal bond issuers with swaps linked to the rate tens of millions of dollars, according to experts.
Barrons: The Best Bond Funds – It’s harder than ever to make sense of the bond market. PIMCO, Fidelity and T. Rowe Price do it differently — and well. Which approach works best for you?
ETF DB: Junk Bond ETFs: More Than Just JNK & HYG – they are hardly the only ETF options for exposure to junk bonds; there are options for achieving very granular exposure in terms of regional exposure with products such as EMHY (emerging markets) and HYXU (global ex-U.S.). Similarly, those looking to fine tune duration have the suite of BulletShares products from Guggenheim (BSJC through BSJH) as well as funds such as SJNK.
The Street: Hidden Risks of High Yield ETFs – As index trackers, ETFs must buy bonds — even if portfolio managers must pay a big premium to complete transactions. Instead of buying index funds, investors should consider actively managed portfolios, says Samuel Lee, an ETF analyst for Morningstar. “Active managers have the discretion to avoid trading when prices are ridiculous,” says Lee.
Learn Bonds: How much Income Should You Expect from a Bond Fund – How do you know how much income you are going to receive from a bond fund and how dependable that income stream will be?
WSJ: Bond Market Still Waving Red Flags – notable today is the U.S. and its 10-year Treasury note. The yield here slid down to 1.52%, within 10 basis points of the all-time low of 1.43% back in June. Yes, the Fed is keeping yields artificially — and historically — low. But when every U.S. bond with a duration of less than seven years is under 1%, it’s a sign that bond investors are maybe not panicking, but certainly making a strong statement about the global economy.
Sammy Pollack: High Yield Bond Market Confirms Stock Market Rally – While some market pundits have expressed fears that the market is about to suffer a major decline, one indicator that has confirmed the recent stock market rally is the high yield bond market.
InvestorPlace: How much lower can Treasury Yields Go? – Today, the yield on 10-year Treasuries (NYSE:IEF) is around 1.59%. On a relative basis, that yield, while historically low, is still much higher compared to what similar maturing debt from other nations like Japan and Switzerland are yielding. This suggests that U.S. yields can do the unthinkable by falling further.
Rajiv Tarigopula: 3 Fixed-Income Plays For The Long-Term – 1) New York Tel Co 2) J P Morgan Chase & Co JPMorgan (JPM) 3) Riverside Cnty Calif Redev Agy Tax Alloc Bds
Index Universe: Emerging Market Debt ETFs – ETF investors looking to join in have five well-established emerging markets bond ETFs to choose from. By “well-established,” I mean funds with more than $100 million in assets and at least a one-year history.
Investment News: What are the True Risks of Emerging Market Debt? – “The reason you’re getting paid all that yield for emerging-markets debt is because they are risky assets,” Ms. Vandersteel said. “It’s a sad argument that people are going around talking about how much better these countries are, based solely on debt-to-GDP.”
Bond Squawk: Bank Bond Yields Spike After Jobs Report – spreads on corporate bonds were wider across the board on Friday with the banking sector underperforming the most. The average spread for the largest U.S. banks on the 10-Year part of the curve widened by 8 basis points (shown in the top section of the chart)
Accounts are not happy with low yields but they have no choice. And there are no sellers so supply is light. 2 much cash, 2 few bonds. $lqd
— Chris Heffernan (@SumRidgeTrading) July 9, 2012
— Trade With Pete (@smarterstops) July 9, 2012
In bonds, I prefer small to big. ETF buying has caused large bond issues to be severely overbought. -Andrew Redleaf http://t.co/R907kX72
— Jake Freifeld (@jake_f) July 9, 2012
— Stephen C. Fehr (@scfehr1) July 9, 2012