Best of the Bond Market: A Bubble in Bond Market Bubble Talk

Best of the Bond Market for March 26th, 2012

Top Story

Tweet by @ChrisAdamsMKTS Story by Blackrock’s Rick Rieder

Investors must not be cowed by end of bond runOur Take: One of the best pieces we have seen yet with solid reasons why the bond market bears may be wrong yet again.  Definitely worth a full read but the crux of the argument is that at the same time demand for income investments is increasing supply is falling dramatically as a result of the financial crisis and de-leveraging that is going on across the world.  Bonds are just like anything else when supply falls and demand stays the same or rises their prices rise, which means yields go lower.


Other Top Stories

Tweet and Article by @zerohedge

The First Crack: $270 Billion In Student Loans Are At Least 30 Days Delinquent – Our Take: As you may have read other places student loan debt just topped $1 Trillion and some are starting to call it the next big potential crisis.  This is the best analysis that we have seen which gives a good stats based overview of the problem and it looks pretty scary.  A lot of this stuff is government backed however some of it is not so at first glance it looks like another situation where both the taxpayer and whoever is holding the non government backed debt might be on the hot seat again soon.  I am planning to do some additional digging on this for future stories however for anyone who wants to jump ahead of me here is a tutorial on Private Student Loan ABS from Fitch.

Tweet and Article from @cate_long

It’s Michigan versus Wall Street in the battle over Detroit’s future Our Take: Another good article from Cate giving an overview of the situation in Detroit which seems to be looking grimmer by the day.  Interesting part of this article though it is an well outlined example of the story we talked about in Friday’s Best of the bond market, entitled “Interest Rate Swaps are Bankrupting Local Government’s“. This part from Cate’s article sums it up well: “The interest-rate swaps were necessary because Wall Street dealers sold variable interest-rate bonds for the city that needed to be hedged. Of course, Wall Street could have sold fixed-interest bonds from the beginning, negating the need for the swaps, but complexity means that Wall Street earns more in fees”.

Tweet by @PIMCO

Gross: #Fed likely to hint @ QE3 in April meeting. Our Take: Bill Gross who runs the largest bond fund in the world  tweeted again over the weekend and reminded us that although the mood is relatively jubilant at the moment, this does not mean that the Fed has changed course and that QE3 is off the table.

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David Waring

David Waring was the founder of LearnBonds.com and has been a major contributor to the extensive library of investing news and information available on the site. Until the launch of Learnbonds.com in late 2011 there was no single site on the internet catering exclusively to the individual bond investor. This was true even though more individuals own stocks than bonds. Learn Bonds was launched to fill that gap.


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