A Storm Brewing in TIPS Market?…Before Declaring Bubble, Consider This…Rotating out of Bonds…and more!

Business Insider: – There’s a storm coming’ in the TIPS market. – Morgan Stanley interest rate strategist Anton Heese’s latest note to clients comes with an ominous warning in its title: “There’s a Storm Coming.”

Financial Iceberg: – US not so high yield bonds: “It’s starting to feel a lot like 2007”. –some important points about the efficacy of a junk bond bubble in the current environment are being missed.

Barry Ritholtz: – Investors start the move out of bonds into stocks. – Signs indicate investors are starting a long-awaited move out of bonds and into stocks, but skeptics remain.

Learn Bonds: – Over 1,100 ETFs, yet only one that focuses on Canadian bonds. – In a recent search for a short-term Canadian bond ETF or bond mutual fund, I came up almost empty. I wanted to buy Canadian government bonds via a mutual fund or ETF. In fact, I was only able to find one that invested in Canadian bonds. The PIMCO Canada Bond Index ETF (CAD) is a passive ETF that holds government related bonds.

Barron’s: – Again with the ‘Great Rotation’: Signs of shift out of bonds? – Investors were burned by stocks over the past decade and have been pouring money into bond funds since the financial crisis. But by now, bonds have pretty much run out of room for capital appreciation, and yields are near historic lows. So at some point investors will need to take the Fed’s cue and get back into stocks.

Fortune: – The ticking time bomb in bond funds. – In an effort to attract investors, bond fund managers are buying debt that’s getting riskier by the minute.

The Short Side of Long: – Are bond yields finally set to turn? – When we measure inflation expectations via TIP vs Treasury spread, also known as break evens. The market seems to be overheating and could be signalling a top for majority of risk assets including S&P 500.

FT: – Yield still lures corporate bond buyers. – Early last summer dividends on European shares yielded almost quadruple the benchmark 10-year eurozone bond, the German Bund. Now they yield only twice as much. This is hardly the great rotation out of bonds and into equities for which investors have been hoping.

Forbes: – Municipal bonds may not be safe from income taxes. – Municipal bonds are safer, as a class, than any fixed-income securities, except US Treasuries, but have the advantage of being priced cheaper than US Government securities. Nevertheless, one of the Street’s most successful and respected municipal bond advisers is suggesting in his year-end letter that he believes some portion of the income you receive from so-called ‘tax-exempt’ municipal bonds will be subject to Federal income tax.”

BusinessWeek: – Mortgage bonds slump as Fed’s buying boost fades. – After posting their worst returns since 1999, government-backed mortgage bonds are starting 2013 with losses on speculation the end of Federal Reserve purchases is in sight and as homeowner refinancing roils the market.

Bloomberg: – Global corporate bond offerings reach $126 billion weekly record. – Company bond sales worldwide reached at least $126 billion last week in the busiest period ever as borrowing costs hovered close to record lows.

Minyanville: – Two warning signs for Treasuries. – Now that we have blown past two Operation Twists and at least three rounds of quantitative easing, even FOMC members are becoming a little queasy about adding buyer of first resort in Treasuries to their role as lender of last resort in market crises. As a result, nominal yields are rising, real yields are becoming less negative, and inflation breakevens are rising.

MarketWatch: – Bonds gain ahead of Bernanke speech. – Treasury prices rose Monday, pushing yields down, ahead of a speech by Federal Reserve Chairman Ben Bernanke late in the session.

Bond Buyer: – Interest in actively managed muni ETFs grows. – More asset managers in the business of muni bond exchange-traded funds think they can beat the industry benchmark.

Morningstar: – Corporate bonds, is there an upside? – Corporate bonds have performed relatively well recently. But is this level of performance realistic going forward?

Dean Popplewell: – Emerging markets bonds best performer in 2012: Impact on currencies In 2013? – EM bonds are proving to be popular, as investors search for yield. But what is the impact on its underlying currencies?

Bloomberg: – Congress hits taxpayer with debt ceiling vote delay. – The looming battle between President Barack Obama and Congress over raising the $16.4 trillion U.S. debt ceiling threatens to slow the biggest wave of municipal refunding since 1993.

ETF Trends: – Emerging markets and financial ETFs set pace for S&P 500. – ETFs benchmarked to developing economies have outperformed the S&P 500 for several months. Related ETFs such as iShares MSCI Emerging Markets (NYSEArca: EEM) and Vanguard FTSE Emerging Markets (NYSEArca: VWO) have seen very strong inflows in early 2013.

Globe and Mail: – Bull market in bonds to continue. – The bull market in US bonds has been going strong for more than 31 years now, one of the longest periods of rising prices for any asset in financial history.


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Simon G

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