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Billionaire hedge fund manager Julian Robertson,the founder of Tiger Management LLC, said that the current bubble in bonds will end “in a very bad way.”
“Bonds are at ridiculous levels,” Robertson told delegates at the Bloomberg Markets Most Influential Summit in New York. “It’s a worldwide phenomenon that governments are buying bonds to keep their countries moving along economically.”
But his comments weren’t echoed by everyone. Carlyle Group LP co-founder Bill Conway, said he doesn’t see a catalyst that would cause the bond market to collapse. Interest rates will stay low and asset prices remain elevated, he said.
Investors should act with prudence as assets across markets have become expensive, Oaktree Capital Group LLC Chairman Howard Marks said on a later panel. Bonds derive their value from interest rates, which are “unnaturally low today.” Omega Advisors Inc. founder Leon Cooperman said while bonds are “ very overvalued,” the stock market appears to be reasonable.
“There’s no indication of euphoria priced into the markets,” Cooperman said.
Todays Other Top Stories
Learn Bonds
Learn Bonds: – Financial commentary – Beware of misinformation. – One of the challenges many investors encounter along their investing journey, is to determine what financial commentary is worth paying attention to and what is worth ignoring. Over the years, I’ve noticed plenty of less than factual information written in financial commentaries, especially concerning bonds. In general, the financial industry seems geared toward promoting equity investments and instilling fear in those considering something else—like fixed income.
Municipal Bonds
The Bond Buyer: – Wanted: Fresh high-yield paper, P.R., Detroit need not apply. – Sophisticated investors are grabbing for high-yield municipal debt whenever they can find it, creating demand for alternatives beyond the Puerto Rico, Detroit, and tobacco bonds that dominate the non-investment grade segment of the secondary market.
Yahoo Finance: – MUNI industry transformed by new data analytics. – Municipal Bond Information Services (MBIS), a consortium of eleven municipal market service providers, has launched three information services designed to enhance pre-trade price transparency and post-trade operational practices for the municipal bond marketplace.
Bloomberg: – California said to begin pricing $2.3 billion general obligation. – California began selling about $2.3 billion of general-obligation debt to individual buyers, with 10-year debt being offered at a yield of 2.52 percent, according to preliminary pricing information.
Washington Examiner: – New bank rule would be costly for cities, states. – A new financial regulation meant to ensure that banks are able weather a panic would have an unpleasant side effect — making it more expensive for cities and states to fund projects.
Janney: – Janney fixed income strategy weekly. – Tobacco bonds under pressure from continuing declines in cigarette consumption.
Green Bonds
Reuters: – Barclays to invest $1.6 bln in green bonds by November 2015. – Barclays will invest at least 1 billion pounds ($1.6 billion) by November next year in green bonds from issuers including the World Bank, the British bank said on Monday, more than trebling its investment in the sector.
Institutional Investor: – Green bonds planting seeds for eco-friendly investment. – Investor interest in green bonds is on the rise, with new issues meeting steady demand. Green bonds offer investors and issuers an opportunity to engage in long-term sustainable initiatives – which may become critical to the global economy. But green bonds do have their risks.
Treasury Bonds
USA Today: – What to Watch: TIPS have been challenged lately. – If you’re worried about inflation, you’ve probably thought about investing in TIPS — Treasury Inflation-Protected Securities. And if you have invested in funds that invest in TIPS, you’re probably wondering why they have had such tiny returns the past 12 months.
Bloomberg: – Bond losses wiped out for Treasuries as dollar conquers all. – The prospect of higher U.S. interest rates is proving to be a boon for the biggest owners of Treasuries outside of the Federal Reserve.
NASDAQ: – Treasury bonds start week on strong note. – Treasury bonds strengthened Monday as worries over the uneven pace of the global economic growth boosted the allure of haven assets.
Reuters: – Bond yields dip on expectation of dovish Fed, weak data. – Long-dated Treasuries yields dipped to their lowest in over a week on Monday on the view that lingering weakness in U.S. economic data may force the Federal Reserve to maintain a dovish stance on raising interest rates.
Investment Grade
Bloomberg: – Mizuho leads $30 billion of bond sales as yields rise. – Mizuho Financial Group Inc. and Aecom Technology Corp. led at least $30 billion of corporate bond offerings this week, keeping September on pace for the busiest month in a year as borrowing costs rise from almost record-low levels.
High Yield Bonds
Adam Aloisi: – You might be a high yield sucker if… – Most mREITs have an inconsistent dividend model that needs to be well understood by those who invest in them. My opinion of what constitutes a “sucker” yield. Examples of some other sucker yield investments and situations.
Emerging Markets
Morningstar: – Hidden risks in emerging-markets debt? – Fickle foreign portfolio flows add another dimension of volatility.
AllianceBernstein: – Growing older in emerging markets. – The rapidly aging demographic in developing countries is an important market for consumer companies. For investors, it’s imperative to understand why complex socioeconomic changes will affect spending patterns in unfamiliar ways as emerging markets mature.
CNBC: – Bonds are great—in emerging markets. – With interest rates poised to rise, many U.S. investors are wary of bonds. But instead of pulling out, experts are urging people to look at relatively attractive fixed income products abroad, particularly in emerging markets.
MoneyBeat: – Emerging markets shouldn’t fear Fed, says amundi executive. – Fears that interest rate rises in the U.S. will trigger a selloff in emerging markets are overblown and misguided, says the chief investment officer of one of the world’s largest asset managers.
Investment Strategy
ETF.com: – Rieder: Bond investors must be tactical. – These are uncharted waters, to be certain, so you might as well throw out the rule books on fixed-income investing, according to Rick Rieder, BlackRock’s chief investment officer of Fundamental Fixed Income, and co-head of Americas Fixed Income. He says that bond investors must be tactical and opportunistic in a way they never had to be before.
ETF.com: – A convertible ETF for rising rates. – CWB is a one-of-a-kind ETF that provides exposure to a market-value-weighted and market-value-selected portfolio of convertible bond securities from the Barclays U.S. Convertible Bond Index. The fund focuses on convertible bonds with outstanding issue sizes greater than $500 million, and is currently serving up a 30-day yield of 2.05 percent on an annualized basis.
NASDAQ: – How to nearly double your yield with this powerful strategy. – The next pullback may not be coming next week or next month, but it will most definitely happen — the market just needs an excuse. And given all the geopolitical uncertainty in Israel, Iraq, the Ukraine and elsewhere, it will get one eventually. But given the strong macroeconomic backdrop, any correction will be more of a pause than an outright reversal. So how to prepare?
Bond Funds
Morningstar: – ETF advantages becoming more apparent to some. – Readers cite lower costs, lower investment minimums, access to sectors among reasons they’ve turned to exchange-traded funds.
Intelligent Investing. – Unconstrained bond funds: Out of the frying pan into the fire? – One big attraction of unconstrained bond funds is that they’re supposed to offer more interest-rate protection than traditional strategies. Many of them currently own a lot of high-yield bonds, prompting the question: “Wait: aren’t you just replacing interest rate risk with credit risk?” The MacKay Shields Global Fixed Income (GFI) team’s answer would be: “we are replacing uncompensated risk with compensated risk.”
Mesh Money: – Bond funds in focus as Fed takes ‘considerable time’ to hike rates. – The primary forms of bond risk include default risk and the interest rate risk. The latter is obviously the most important these days. It was expected that the Federal Reserve will not announce a rate hike, and it did not. In fact, the central bank reassured investors that the low rate will continue for “a considerable time” after the bond repurchase program ends as the economy faces “significant underutilization of labor resources.”
Zacks: – 5 Best-ranked diversified bond mutual funds to outperform. – Diversified bond funds provide investors with a convenient and affordable option to hold a portfolio of bonds from different economic sectors. The costs incurred to create a portfolio of individual bonds would be significantly higher than investing in this class of funds. The associated risk also undergoes a decline since volatility in a specific sector has only a partial effect on the fund’s fortunes. The opportunity to reinvest the income generated and a relatively higher level of liquidity also make them secure and attractive investments.
Sherlock Holmes and the Long Bond – What drove the bond on Friday $tlt $tbt be careful of the memes that are out there
— Peter Tchir (@TFMkts) September 22, 2014
20% stocks/80% bonds is safer than 100% bonds over time @AllianceBernstn
— QVM Group LLC (@QVMinvest) September 20, 2014
#AtlanticCity rating cut to BBB+ from A- by S&P, though that’s still three levels higher than Moody’s Ba1 junk grade.
— Brian Chappatta (@BChappatta) September 22, 2014
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