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Bonds Signaling Bear Market?…10 Yr Treasury Yield Breaks Uptrend…Fed Warned to Rein In QE… and more!

bear market

John Overstreet: – Are bonds signaling a new bear market? –  There is increasing concern about the divergence in stocks (DIA) and Treasury yields (IEF) that has transpired this year. On Friday, the 10-year yield went as low as 1.68%, and this is considered a sign that the stock market has failed to take notice of a deterioration in underlying conditions. The unemployment numbers did not seem to help the bull case very much, and gold saw a nice little pop.

Think Big: – 10-year treasury yield breaks uptrend. – Ever since last July, yields on the 10-year US Treasury have been steadily rising with a series of higher highs and higher lows as economic data has improved. As shown in the chart below, yields have been moving within a defined upwardly sloping range. That is until today.  Over the last week, economic data has been consistently coming in lower than expected, taking yields on Treasuries down with it.  After today’s horrendous employment report, the yield on the 10-year has now broken the uptrend that has been in place since last Summer. What’s next?  Sub 1.5% Treasury yields?

FT: – Fed warned to rein in QE. – One of Wall Street’s biggest money managers has called on the Federal Reserve to rein in its programme of quantitative easing, saying its bond-buying tactics are a “large and dull hammer” that have distorted markets and risk stoking inflation.

Learn Bonds: – Are dividend-paying stocks a “good alternative” to bonds? – If you are a fixed-income investor who is contemplating liquidating a portion of your bond portfolio in order to buy stocks with that money, please be sure to consider more than a stock’s P/E ratio and current dividend-yield in your research.  Additionally, if you will need to draw down your investment portfolio in order to live during retirement, be sure you fully understand the consequences to your portfolio.

Bond Buyer:  – How can Puerto Rico avoid the drop. – With Puerto Rico on the verge of junk status, Alan Schankel of Janney Capital Markets explains how Puerto Rico can prevent further downgrades.

Forbes: – Beyond the 10 year Treasury yield: How to follow the bond market with ETFs. –  The 10 year Treasury rate is often the only piece of market data reported by the media about the bond market. Just like the Dow Jones Industrial Average is an extremely flawed measure of stock market performance, the 10 Year Treasury often misrepresents the performance of the bond market. In fact, the value of the 10 Year Treasury could rise in value while the value of the your “core bond fund” could fall. So what should you follow instead of the 10 Year Treasury Yield?

Forbes: – Forget about the Fed dialling back QE3, buy bonds. – The economic recovery has been progressing so well that it had become almost a sure thing the Fed will begin phasing out its easy money policy and QE stimulus programs much earlier than planned, possibly beginning as early as this summer.

Minyanville: – The hierarchy of risk and return are returning to normal. – We are almost back to the full normal in our New Normal era.  If we map the excess total returns of the Russell 3000 Index, and the Bank of America-Merrill Lynch series for convertible bonds, high-yield bonds and A-rated bonds to the total returns for 7-10 year Treasuries since February 1990, we see only investment-grade bonds are underperforming Treasuries.  Stocks finally have pulled ahead of high-yield and convertible bonds.

Bloomberg: – Hurricane fund selling $2 billion as Florida spared. – Florida’s catastrophe fund is set to sell $2 billion of taxable revenue bonds this week, the biggest municipal-debt offer since 2007 in the state, which hasn’t been struck by a major hurricane in seven years.

Bloomberg: – Wal-Mart bonds fly off shelf as shoppers stew. – Wal-Mart Stores Inc. (WMT) is winning the lowest borrowing costs this year as its AA credit rating offsets challenges from a corruption probe to reports of thinly stocked shelves.

Bloomberg: – Bonds cheapest in 7 months propel Treasury sales. –  US municipal debt is the cheapest in seven months relative to Treasuries, luring buyers such as Deutsche Bank AG and signaling demand for local bonds as states and cities are poised for their biggest issuance week of 2013.

FT: – Japan buyers go abroad in search of yield. – Bond investors in the eurozone and US are betting they have a powerful new ally: yield-starved Japanese buyers. With the Bank of Japan fully embracing quantitative easing and seeking to expand its monetary base aggressively, US and eurozone bond markets have received a visible shot in the arm in recent days, with prices rising and yields falling.

Ploutos: – Bond market review Q1 2013. – The recent market move notwithstanding, the first quarter of 2013 should be a microcosm of the market we will see over the next several years. Slowly rising Treasury yields produced anemic bond returns in the first quarter with most higher risk instruments outperforming due to modestly compressing credit spreads. The days of equity-like returns in domestic fixed income fueled by monetary accommodation are likely largely in the rearview.

Barron’s: – Treasuries slip even as stocks sag. – It’s been a great run for Treasuries over the last few weeks but maybe they just need a breather, and they’re getting one Monday even as stocks sag early on. As I pointed out in my Current Yield column in this week’s Barron’s, bonds had surged on Friday’s awful employment report, but even by late in the day Friday they had started to pull back a bit.

Barron’s: – Don’t expect ‘great rotation’ anytime soon. – In the ongoing chronicles of “Great Rotation” theory, Citi today weighs in and tells investors not to hold their breath awaiting any such large-scale moves out of bonds into stocks. From Citi strategist Vikram Rai.

Reuters: – Minnesota governor proposes $720 mln GO bonds to fund projects. – Minnesota Governor Mark Dayton proposed an $812 million capital improvement plan on Monday that calls for $720 million of state general obligation bonds.

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https://twitter.com/PIMCO/status/321283516795084800

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https://twitter.com/Fixedology/status/321318019596959744

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Adam Green is an experienced writer and fintech enthusiast. He he worked with LearnBonds.com since 2019 and covers a range of areas including: personal finance, savings, bonds and taxes.

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